STFC Committee Meeting

SUB-COMMITTEE ON TAX EQUITY FOR CANADIAN FAMILIES WITH DEPENDENT CHILDREN OF THE STANDING COMMITTEE ON FINANCE

SOUS-COMITÉ SUR L'ÉQUITÉ FISCALE POUR LES FAMILLES CANADIENNES AVEC DES ENFANTS À CHARGE DU COMITÉ PERMANENT DES FINANCES

EVIDENCE

[Recorded by Electronic Apparatus]

Tuesday, May 11, 1999

• 0903

[English]

The Chairman (Mr. Nick Discepola (Vaudreuil—Soulanges, Lib.)): Order, and good morning.

Pursuant to the motion adopted by the Standing Committee on Finance, dated March 17, 1999, the subcommittee resumes its study on tax fairness for Canadian families with dependent children.

Today we are in Calgary. It's the second day of our hearings across Canada. Yesterday we were in Vancouver. We head out tonight to Toronto, Halifax, and Montreal.

I'd like to welcome Mr. Ritchie, who is going to be presenting on his own behalf.

We look forward to your presentation, sir. We ask you to make the presentation around 10 minutes, at the most, to leave ample time for questions from members.

Welcome, Mr. Ritchie.

Mr. Randy Ritchie (Individual Presentation): Good morning, and bonjour. Welcome to Calgary. It's nice to see you here, concerned about the well-being of families with dependent children.

To begin, I felt it was necessary to give some background on my particular situation as a concerned citizen. To understand my comments, I think you should understand my family.

My name is Randy Ritchie. I'm 39 years old. I have a Bachelor of Commerce degree from the University of Saskatchewan. I work in the executive search industry as a consultant.

My wife, Diane, worked with the Royal Bank for a number of years. She started right out of high school. We have two children, and have been married seven years. We were a dual-income family up until last July, doing the “day care thing”, as I'll call it. Then Diane left her job with the bank.

Up until last year, when my own career stabilized, we really didn't have an option for Diane to stay at home with our children. Now we're a single-income family.

We had a wonderful day care, but we believed strongly that our children were missing the advantages of full-time parenting. That's why we decided that Diane would sacrifice her career, her income, and her pension plan with the bank for our children. After working nearly 20 years, she left.

However, to accomplish this we must withdraw $850 a month from my wife's RRSP plan to supplement our wage. We're not an extravagant family. We've never taken an exotic holiday. We drive a seven-year-old minivan and a nine-year-old Thunderbird.

• 0905

We're basically trying to provide average, middle-class luxuries that were similar to the ones our mothers and fathers provided to us. Our kids are enrolled in hockey and soccer, swimming and music lessons, and we take them to the odd Flames or baseball game. So that's our background.

Of the issues I have outlined here in my documentation, the first one is something that I believe affects all Canadians, whether they have a family or not: We have EI premiums included in the general revenues of the government. Very clearly, this makes EI premiums a tax.

I think Canadians are tired of misleading statements and comments coming from politicians, whether they are from the Bloc, Liberal, NDP, PC, or Reform parties. If you're taking money from us, whether it's from the Canada Pension Plan, the EI fund, or taxes, it still means we have less money to live on. There's only one taxpayer.

Government seems to have been fooling Canadian citizens for much too long by saying they've cut taxes when they've been raising Canada Pension Plan and EI premiums for years, and the EI premiums go into general government revenues.

The law profession recently has been asked to simplify language in contracts, and I think the government should be looking at doing the same in communicating tax policy to Canadians. Anything less is dishonest. I would ask that you put an end to this discreet method of taxation.

When our net take-home pay starts to increase, then you'll truly have begun to cut taxes. Again, I recognize that there's been a reduction in EI premiums in 1999, but CPP premiums continue to rise.

Many interest groups lobby for less taxes, but I found it particularly sad that last year, in the budget, families with children were being taxed at essentially the same rate as families without children. For 10 years I watched my friends with children pay less tax to help raise their children. Then, around 1993, the year my son was born, I watched in amazement as the government decided to treat all taxpayers, with or without children, almost entirely the same.

The question is, how is this fair and equitable? Married couples without children cannot possibly have the same or more expenses as families with children. It's simply impossible.

To politicians and other Canadians who might say it's my choice to have children, consider this: Doesn't anyone, the government included, realize that today's children are going to be paying for our Canada Pension Plan in the very near future, when they begin working? Simply put, if Canadians without children will benefit from my children working and paying into a Canada Pension Plan that desperately needs funding, shouldn't that be taken into consideration when calculating one's taxes in terms of raising a Canadian asset? We give tax breaks for many other kinds of investments in Canada. Why shouldn't children, at the very minimum, be considered the same way, albeit in a very crude form?

What really irritated me this past year was how the government considered, and is probably still looking at, giving small-market sports teams a tax break when they haven't looked at doing anything for the everyday family. Does it not dawn on anyone that if we have more money in our pockets, we can afford to go see a Flames game more than once a year and perhaps save a professional Canadian sports team without their receiving a handout?

I'm an avid sports enthusiast. I still play hockey. I want the Flames to remain in Calgary. But I think we have to take a moment to prioritize and follow some common-sense, simple ideas. This is simply a matter of principle. The equitable tax treatment of families must come first in Canada, before tax breaks are considered and given to wealthy owners of sports teams and to pro athletes.

Even more disconcerting and disappointing were the comments that Liberal Jim Peterson made in the spring session about stay-at-home parents. To me, his remarks showed just how uneducated the government is in this matter.

How can the government justify giving a $14,000 reduction in income to a dual-income family earning $70,000 per year while totally ignoring the social contributions being made by a single-income family? If the government can combine our incomes to determine child tax benefits and seniors' benefits, why can't they do this to calculate tax on family income?

Once more, the government seemed to fool most of the Canadian people with comments trying to justify the deductions for dual-income families. Yes, dual-income families deserve this deduction for expenses like day care. However, this isn't the issue. The issue is the overtaxation of all Canadians and the inequitable tax treatment of families with a single source of income.

The latter point, discouragingly enough, had to be raised at the United Nations before our government gave it any serious consideration with this subcommittee. One can only hope that our government won't neglect it further.

• 0910

If we accept the fact that children are the best investment we can make in our country, then our question becomes, first, what would be the fairest, or most equitable, way for us to do this? What would be the most efficient, or least costly? What would be the most effective, meaning the least amount of problems and making the most amount of sense?

Surely we can't be thinking, as Canadians and politicians, that we should be maintaining or increasing our taxes for the federal government to run such programs as the $5-a-day day care in Quebec. This simply doesn't work. The quality of day care is poor, and taxes in Quebec are outrageous. All Canadians need more choice to reduce taxes. Less choice, by maintained or increased taxes for government programs forced upon us, is not something I want.

Fortunately, our family has some limited financial flexibility to choose to spend its own financial resources to continue to live a modest, single-family lifestyle. We're not nearly as badly off as many other Canadian families in our country, but I ask you, when a family has to take money out of an RRSP program to maintain an average Canadian lifestyle, how can that be equitable tax treatment? Don't worry if single-income families get more money in their hands; the money will find its way back into the economy for much-needed items best determined by individual families.

I ask you to listen to your conscience and to be simple, straightforward, and fair about this. Support the families who need to have dual incomes but don't continue to penalize single-income families with discriminatory tax laws. Recognize the benefits and the sacrifices single-income Canadian families make for their children and for the betterment of Canada. I encourage you to give single-income families a reduction in taxes and an equitable financial scenario to raise their children.

Thank you very much for allowing me to address you this morning.

The Chairman: Thank you very much, Mr. Ritchie.

Colleagues, we will have six-minute rounds, please.

Mr. Paul Forseth (New Westminster—Coquitlam—Burnaby, Ref.): Thank you, Mr. Chairman.

Listening to your general theme, that personal income taxes are too high, I find it has the ring of many of my own speeches in the House of Commons.

One of the things you talk about is the tax differential between a two-income family economic unit in tax law and a one-income family economic unit. The tax differentials there are related to the progressive tax system and have nothing to do with the child benefits.

For instance, there's a difference between a two-income husband-and-wife unit and a one-income husband-and wife-unit, neither with children. The largest differentials come about because of the progressive tax system, which can only be fixed with a flat tax and a fundamentally different approach on how to handle it.

It's interesting that you made that economic choice, and as well the social choice, for one of the parents in your household to stay at home and give up income for the social benefits and so on for your children. Have you addressed the income tax form, which you just completed this month, looking particularly at how that form can be adjusted to recognize the social value, you might say, of a stay-at-home parent, disregarding the inequities I mentioned—the one-income, two-income?

Have you addressed the various considerations, you might say, that are given on the income tax form in relation to children, such as the child tax benefit and expense deduction and so on? How could that be fixed to at least soften the blow, so-called, in terms of the situation you describe your household as being in?

• 0915

Mr. Randy Ritchie: I don't know if I have any recommendations directly related to changing the tax structure. I think the point I was trying to hit home with my information was that we're asked to save for our retirement as we get older, so we're contributing to an RRSP plan. The highest marginal tax rate begins at approximately $60,000 per year. It seems to me that somewhere in that range of income, where one saves for their retirement....

I think it's 13%, so you can tack on another 13% there, which would be approximately $7,000 or $8,000. So you're looking at about $68,000.

If you deduct that back, somewhere in that range of $75,000 to $80,000 there should be some recognition for people lower than that family income level and who are keeping one of the spouses at home.

At that point, we're providing for our retirement by saving 13%. There's some benefit. Whether it's a full deduction of $14,000, I don't know. I'm not an expert on taxation, so I can't give you a flat tax rate. But for people earning less than that amount, I mean, you're asking us to save for our retirement, to raise children, and to do things.

Mr. Paul Forseth: Perhaps I can cut you off at that point and just ask you this. In your household, when you were wrestling with this decision, did you carefully sit down and compute the numbers around mother continuing to work, and you having to make other arrangements, making a decision on the numbers? Or was it more a philosophical or attitudinal situation about what you felt was right to do as a parent for your child, based on your social philosophy?

I'm trying to get at what were the determining factors for you to make that decision for yourself.

Mr. Randy Ritchie: For the grief and effort one goes through to get up in the morning, rush the kids to day care, and go through that whole scenario, when we calculated what we received back, net, after the deduction, it just didn't make sense for us any more. Now that I'm in a situation where my career has stabilized, and I have a future in a career, we felt it was just not worth it for the extra few dollars we were receiving to do that. It seemed better for all concerned, including my wife and children.

I mean, it was the stress level on the family that made us take that decision to go that route, at least for the next four to five years until the children are older and more self-sufficient, and they've been nurtured and formed better, I guess, in our opinion.

Mr. Paul Forseth: Thank you.

I'm finished.

The Chairman: Thank you, Mr. Forseth.

[Translation]

Mr. Cardin.

Mr. Serge Cardin (Sherbrooke, BQ): Good morning sir. We appreciate your taking part in these hearings. You stated that you had made a choice, one based on human and parental values. You have also made an economic choice, in that you don't believe it's worth it to expend all of this energy to attain a slightly higher standard of living.

One of your recommendations calls for an overall tax cut for all Canadians, whether married or single, whether with or without children. That is a legitimate demand. My colleague also mentions this often when he speaks out.

Another of your recommendations concerns family assistance. When one spouse chooses to stay at home, it is in fact a choice he or she makes. People want the government to take choices like this into account. In my opinion, parents contribute more to their child's education than a daycare or other caregivers can.

In considering possible tax relief, do you think the government should raise the basic child exemptions to the same level as the basic personal exemption? This is one of a number of recommendations that we have received.

• 0920

We would be looking at an annual federal tax exemption of about $6,450. This additional exemption would automatically help to ease the tax burden of families and would allow them to set aside some money for their children's education. Someone suggested this to us yesterday. How would you feel about an initiative like this?

[English]

Mr. Randy Ritchie: I didn't see the recommendation.

You know, there are many ways to do this. I know people have lobbied to include the maximum of $14,000 deduction for things like day care for dual-income families or single-income families. I don't know if that's fair or not. I can't say, because I'm not a tax expert, but certainly nothing is unfair. To me, whether it's nothing or $14,000, somewhere there has to be a happy medium to recognize that there's some benefit, something positive going on, by this happening.

I didn't see the information yesterday as it was laid out. I guess it must have been put forward in Vancouver.

[Translation]

Mr. Serge Cardin: Yes, it was recommended to us. It's one possible calculation. Of course, this would affect government revenues, but the exact impact isn't known. I don't image you calculated the cost last night, Mr. Szabo, but I would think it would be several billion dollars. Be that as it may, increasingly I have observed that people want choices. Moreover, they want their choices to be supported and they don't want the government to be making choices for them. The government must allow people to decide for themselves whether or not they want to stay home and raise their children or whether to go out in the workplace and avail themselves of daycare services. People want the government to consider the family as a priority.

The Chairman: Just for your information, Mr. Cardin, yesterday, the Globe and Mail published a table showing that it would cost the government $7 billion to grant a $1,000 credit per child.

Mr. Serge Cardin: Since the government does have room to maneuver, everything is possible. It all comes down to making choices.

The Chairman: Thank you.

[English]

Ms. Dockrill.

Mrs. Michelle Dockrill (Bras d'Or—Cape Breton, NDP): No, Mr. Chairman.

The Chairman: Mr. Herron.

Mr. John Herron (Fundy—Royal, PC): I didn't have the privilege of listening to your presentation. Sorry, but I had to take a phone call. I've just now had a chance to glance at your brief.

I wonder if you can give me your impression of a debate that's starting to grow, and that's with respect to income-splitting. Some groups have said it's clearly the fairest thing to do, and some groups have vehemently attacked it.

Mr. Randy Ritchie: Again, it's hard to judge the best method. I'm not an expert in this area, although I have a Bachelor of Commerce, and I majored in accounting. So I understand the principles.

The way things are laid out now, I think all you do is stress families out. They look for ways to clearly get around this issue. They look for ways to cut their taxes. They look at how they can cut corners and do things in a kinky and creative way to try to achieve what they believe is important. I don't think we should have to do that, or need to do that. It's an old adage, but there has to be something simple to address this.

Getting back to your comment, do we do income-splitting? I don't know. I really don't know. I guess you could, but you'll probably be disappointing some, and it will upset other people out there.

• 0925

I think it's important to recognize that there are people who need the benefits of, and have to have, two incomes. We have to recognize that. But how do we value single-income families?

As you say, we can combine the two incomes to determine what our child tax benefit is, we can combine the two incomes in a seniors' family to determine the seniors' benefit, so why can't we combine and have a family source of income, and a tax rate and a methodology created to address that?

Off the top of my head, that would be the thing I would suggest. It's clean and simple—a family taxation rate. Not only that, it also promotes the family staying together, which I think is important in Canada.

Mr. John Herron: Thanks, Mr. Chair.

The Chairman: Thank you, Mr. Herron.

Mrs. Redman, please.

Mrs. Karen Redman (Kitchener Centre, Lib.): Thank you, Mr. Chairman.

Mr. Ritchie, thank you very much for coming and for bringing your point of view. It piques a few questions in my mind. It's nice to be able to have a dialogue with a real Canadian.

You talked about a simple solution. Quite frankly, that's our problem; there are no simple solutions. The face of the Canadian family, whether we like it or not, is very much changing. I realize you're coming with your own perspective, and I do appreciate that, but I guess you'd also appreciate, from our point of view of bringing in public legislation, that we have to do something that's inclusive and that addresses all families.

From my own personal point of view, I think the one thing we have to do is avoid social engineering. You're talking about a two-parent, one-income family, but one-sixth of all Canadian families are lone-parent, and they may not have the choice of whether or not they need to go to work. Whatever changes we make in legislation, we have to try to address all concerns.

I appreciate the fact that, from your point of view, it sounds to me as though you're asking if you can have the option of being treated as a family unit and perhaps income-splitting. Might that address some of your concerns?

Mr. Randy Ritchie: I don't know about income-splitting. Again, you can make these calculations, the child tax benefit and combined income, the seniors' benefits and combined income. Why wouldn't you want to make that on combined income for a family? I mean, if you're doing it one way to calculate an aspect of programs that you deliver to the public, why can't you do that for the taxation system?

I don't know if you define that as income-splitting, or how you do that. If you maintain the current tax system, I guess it would be income-splitting, but I think there is some value in promoting a taxation system for families as a whole income unit, some social aspect to it.

I'm not an expert in that. It's just my own personal belief, I guess.

Mrs. Karen Redman: One of the suggestions put forward by other witnesses is actually income-averaging. For instance, for your wife, who has opted out of the workforce, instead of paying all the tax in one year we may stretch that. I think previously it was looked at as a five-year window of income-averaging. I'm wondering if you've ever put any thought to that.

Mr. Randy Ritchie: It's interesting that you brought that up. When I got out of university in 1982, I missed the income-averaging benefit, as a new wage earner, by I think a couple of years. So once I started earning, there was no benefit derived to that. I know it's something that was previously in place in Canada.

It could possibly be an option, but to me, that becomes a little more complicated again. You know, you're going back, looking at five years. Yes, possibly, but I would say, at first glance, it wouldn't be my first choice to look at that.

Mrs. Karen Redman: You make a statement in your brief in reference to Quebec, and I guess I'm just wondering what you're basing this on. You say that the system they have in place has led to poor child care and outrageous taxes.

What are you basing that comment on?

Mr. Randy Ritchie: I saw a documentary on CBC about three or four months ago that showed very clearly that the day cares are overcrowded and that there's a long waiting list for people to get into those day cares.

It's a wonderful idea. When my wife and I were dual-income earners and we heard that the Liberal government was going to present a child day care program four years ago, we said, “Whoopee! This is great, because finally we're going to be recognized.” But as we had our children, and we went through this—even the lady who ran our day care, and did a wonderful job, would substantiate this—we came to believe our children were missing full-time parenting.

So what do I base this on? My own personal circumstances, and on the material I read. I'm a well-read person, and I like to read The Globe, to look at these kinds of articles. I like to keep in touch with what's happening in Canada, but specifically what's related to the Quebec situation and the day care program.

• 0930

Specifically, a CBC documentary that aired in the spring this year clearly showed that there were some problems with that program. Unfortunately, we all know that Quebec has the highest tax rate here, and that's a concern of mine. I don't want to see a program implemented in Canada and see our taxes go up and maintained because we run programs like that.

Mrs. Karen Redman: You mentioned earlier about treating the family unit as one unit to deal with the seniors' benefit. We didn't move to the reforms in the seniors' benefit, so we still have the OAS and the GIS for seniors.

One of the things that, again, is a concern for me personally is that as much as CARP and a lot of seniors' groups became very well educated and talked about the ramifications of the proposed changes, and because as a government we saw an improving financial situation and we didn't have to go that direction, those changes would have helped the single person, who generally is a female senior, living at the poverty line.

You've made some really scathing attacks on CPP and the moves and changes this government's put toward CPP, and yet that is something all Canadians need to be able to count on. I know you talked about the fact that you're withdrawing $850 a month out of your RRSP, but with CPP, those changes were made so that people who can't afford even to put money into RRSPs at least look at having some kind of replacement for their working life when they become seniors.

Those changes that we made to CPP also should ensure that it is moving toward being more self-funded. It still will not be self-funded, but it will be there for your children and grandchildren.

I'm wondering if you've looked at that whole equation around CPP and some of the legislative changes that have been made.

Mr. Randy Ritchie: Yes, I believe I have, and that's why I made the comment I did. We know the CPP is underfunded. We know there's a shortfall. We need productive citizens to contribute to that program. The more productive they can be, the better off we're all going to be.

So when you look at it from an economic or investment perspective, if our children are going to be doing this, why can't that be recognized? We have all kinds of tax-shelter scenarios.

In terms of the seniors' benefit, again, I'm coming at this from off the top of my head, but in Alberta, I'm pretty sure if you have x dollars coming in, and they start to claw back your benefits, from a senior's perspective, they're looking at this from two separate sources of income from seniors, in total.

I believe this is a dangerous precedent. I've heard of seniors actually getting divorced so that they can receive more money, because if they're single, they won't have this combined income. Whether that's true or not, I don't know. I heard that from a third party. But the potential for that exists.

Mrs. Karen Redman: It does get reduced, but it's based on income levels. I would tell you that they would be the upper end of seniors. It starts at $54,000 and ends at $79,000, which for a lot of seniors would mean they were very well off, because there are lots of seniors with annual incomes much less than that.

Is my time up, Mr. Chair?

The Chairman: It is up, but we will be generous, since you weren't here yesterday.

Mrs. Karen Redman: Thank you very much.

I do appreciate the facts you've brought forward on your proposal. Given the fact that from my perspective there aren't any simple answers, if there were three things we could do to help improve the lot of the lone-parent family, what would they be, in your estimation?

Mr. Randy Ritchie: Well, somehow these people need to be supported at the day care level. Obviously they have to contribute to society. They have to work. There has to be some way for them to be compensated and to be recognized for the fact that they're the lone parent in the family. We have to support those people. If we don't, down the road they or their children will be burdens on society. We have to recognize that.

• 0935

How do we do that? I know here in Alberta, if anyone is earning less than $20,000, they're not going to be paying any tax, or won't be very shortly, anyway.

What we can do all comes down to dollars and cents and economics. Somehow those people have to be supported.

I've not given any thought as to how you would specifically do that, whether you would pay for their day care or whether you would not charge them any taxes. I don't have an answer. We have two children, so there are four members in our family.

From my perspective, it's important for those individuals to be recognized. Certainly anything that's done should not be done on their backs to improve the situation for other individuals. They're clearly more important than we are, and I recognize that.

Mrs. Karen Redman: Thank you very much.

The Chairman: Thank you, Mrs. Redman.

Mr. Ritchie, perhaps I can make a clarification. The EI revenues are, you are correct, in the general consolidated revenue fund. It was a directive by the Auditor General of Canada in 1986 that compelled all governments to report that liability. Up to that point in time, the EI was publicly funded by the Canadian taxpayers, and it was in a deficit position.

So it's not politicians who are trying to mislead anyone; it's proper reporting. I believe in 11 of the last 17 years the EI fund has actually been in a deficit position, and the Auditor General just felt it was more reflective in the statements of the country to include it. That's the reason it was done.

I would like to ask a question much along the lines of Mrs. Redman's. As a country, if we're trying to give families and individuals choices—for example, the choice of a parent to return to the workforce or the choice of a parent to stay at home—what would you recommend we do to make those choices easier? In your own case and in others that we've heard, you felt....

I don't want to touch on the taxation angle of this. If we reduced taxes, or nobody paid taxes, then obviously it'd be the best of all worlds.

If we're trying to accommodate and make it more flexible for families to make that choice on their own, what would you recommend this committee do in order to help them make the choice that's appropriate for their needs?

Mr. Randy Ritchie: I think somewhere we have to study and we have to look at what is fair, at what an average family needs to raise their children, not in a manner where there's a lot of hardship but in a manner that will provide them with a few minor luxuries, as I discussed in my brief. Someone earning in excess of $100,000 a year probably does not need, I would suggest, the same kind of tax relief. I would suggest they wouldn't need any, as a matter of fact.

It seems to me that for the people who are in this $40,000 to $80,000 combined family income range, it's a difficult choice to make. A lot of people don't have that choice. They need to have both members of the family working.

I think you'd probably see more people with only one member of the family working if it was a little more advantageous—for instance, if they could calculate, okay, by doing this and by doing that, we'll be out by only $400 or $500, and we can get by on that. Right now, the way the system is set up, people are short, as you can see, $850 to $1,000 a month to do something like this to maintain their current lifestyle and not shortchange their family with those kinds of benefits.

What would I do? I think the magic number is somewhere around maybe $75,000. Again, I'm not an expert, and I don't know, but for people earning, as a total family income, between $40,000 and $75,000, something has to be done to recognize the value of what these people contribute.

• 0940

The Chairman: With regard to the measures we would propose, would you target them to the caregiver, to the child, or to the family?

Mr. Randy Ritchie: I think it should be targeted to the family. I know we're not supposed to talk about the social aspects, but I think that's a side benefit to this. It's about children, and it's about taxes, but really, if we can do things that keep people thinking about family....

I mean, when we talk about single-family members of society, unfortunately, most often a young lady or a woman is left to raise a family on her own. If a family taxation rate were put in place—and I don't know, I'm not an expert—then maybe the males or the men in the family wouldn't be so quick to leave.

If we're going to play with this thing, I think it's important to concentrate on it from a family perspective.

The Chairman: Thank you.

Colleagues, on your behalf, I'd like to thank Mr. Ritchie for giving us the benefit of his insight and his input.

We thank you very much, and look forward to our report to the finance committee in the fall. If you have any other suggestions, please feel free to write to the committee clerk. The full committee will be hearing witnesses again in the fall on budget recommendations, so you're welcome to present a brief then as well.

Ms. Redman.

Mrs. Karen Redman: Thank you.

I already had my six minutes, but I would just like to add something.

I really do appreciate the fact, Mr. Ritchie, that you're coming from your point of view, but I feel I have to speak to your last comment. We all come together with our own life experiences. I have four children, and I had the privilege of choosing to stay home with them. It worked really well for our family. It fit in with our family values.

I appreciate the sacrifices you and your wife are making for your two children, but implicit in the last comment you made is that it's for economic reasons that couples stay together as family units or that family units break down. I just have to challenge that. The economic freedom that women have by going into the workforce....

One of the criticisms we hear from certain groups right now is the fact that, if anything, the income tax system appears to encourage women to go out to work because of some of the tax write-offs we give working parents for child care, and that perhaps in some way it could be construed as social engineering.

I feel that one of the basic tenets for me personally, as a member of Parliament, is that whatever we do in the Income Tax Act should not be social engineering.

So to make the comment that if the benefit was a family benefit, and you didn't have to worry about whether it was higher-wage earners or lower-wage earners that got that benefit, implicit in that is the fact that it's economic reasons that keep families together.

In some ways, I don't disagree with you, because I will tell you, I think it's economic independence that has allowed people to get out of marital situations that were damaging to them and/or their children. As a government, probably our responsibility is to protect the children who have very little say in how the family unit goes forward, but it is not the role of government to dictate whether or not families stay together through the Income Tax Act or anything else.

Mr. Randy Ritchie: I agree with that. What I'm suggesting is that the government is doing nothing right now with respect to being neutral on that. A report that just came out indicates that divorced families and people are poor. I can't recall where it came from, but it was just in the last week or two. One of the think-tanks put something out.

I mean, when you get divorced, you're going to live a life, and you're going to be poor. Again, I'm not an expert, but there has to be some factor or role in terms of what level. Whether it's 10%, 50%, or 80%, I don't know, but I think there's some value to that. There's some value to keeping people focused on that.

Please don't misconstrue my statements as suggesting that people should stay together at all costs. I'm not suggesting that. There are very clearly circumstances or situations where it makes absolutely no sense.

• 0945

Am I saying right now that the government is trying to do social engineering? I don't know if they're so much trying to do that right now, but as a person raising a family, I don't think they're doing all they could do to have this particular situation be treated fairly and equitably in terms of raising children. I guess that's my point.

Mrs. Karen Redman: I do appreciate that, but I just felt I needed to respond. I have some sensitivity that, generally speaking, it is the woman in the couple that is the lower-wage earner, and we need to be attentive to how we pay whatever benefit we pay. To my way of thinking, it's key.

Mr. Randy Ritchie: I agree. As I mentioned earlier, I think those people come as a priority over someone such as myself. I have no qualms about that. If we don't work with and help those kinds of individuals now, it's no good for anyone.

So I agree with what you're saying. Again, I think the family, whichever definition you want to have, could be a catalyst to provide some other benefits to society by using that as a methodology to deal with this taxation issue.

Mrs. Karen Redman: Thank you.

The Chairman: Again, thank you, Mr. Ritchie. I wish you good luck in your endeavours.

On behalf of my colleagues—I know I speak for them—we certainly will put the family first and the children first within the limited means of the federal government. Thanks to, I guess, the sacrifices Canadians have made over the past four or five years, we do have a few choices now that we didn't have maybe four or five years ago.

Mr. Randy Ritchie: Thank you for allowing me to speak, and good luck in your continued endeavours.

The Chairman: Thank you.

Our next presenter is from the Alberta Federation of Women United for Families. We have the pleasure this morning to welcome its executive director, Hermina Dykxhoorn.

Ms. Dykxhoorn, I think you know the format. If you can make your presentation within about 10 minutes, that will leave ample time for questions from members.

On behalf of the members, I'd like to welcome you and ask you to begin your presentation, please.

Ms. Hermina Dykxhoorn (Executive Director, Alberta Federation of Women United for Families): Ladies and gentlemen, thank you for giving us an opportunity to address some of the concerns we have with the taxation system as it relates to Canadian families.

The Alberta Federation of Women United for Families is a grassroots, non-sectarian Alberta women's group that was started in 1982. We have never received any operating grants from any government, and rely solely on private memberships and donations to continue. We support and call for legislation that supports the family as the basic unit of society.

In 1996 the Royal Commission on Taxation, the Carter commission, argued that the family is foundational. They stated:

We believe the family is today, as it has been for many centuries, the basic economic unit of society...It is the continued income and financial position of the family which is the primary concern, not the income and position of the individual members.

Governments have always tried to influence and alter citizens' behaviour through the tax code. Witness the heavy tax on alcohol and cigarettes, the so-called sin taxes. In an attempt by government to discourage driving and keep the air clean, about 50% of what we pay per litre of gasoline is tax.

Until recently, as evidenced by the above 1966 quote from the Carter commission, marriage and family have been favoured in tax policy. To illustrate this, in 1950 the child/dependent spouse deduction was 30% of personal income. By 1990, 40 years later, it had fallen to 9.5%, a 60% drop. Marriage and family were favoured for two very important reasons—the stability that marriage brings to the community and the fact that married couples have children. The social and community good of having and raising the next generation in a stable environment has in the past been rewarded in the Canadian tax code.

• 0950

Unfortunately, that is no longer. For the last 30 years, tax policy has increasingly been driven by a spirit of individualism rather than by a concern for family formation or maintenance.

In November of 1998, the C.D. Howe Institute expressed the reality 32 years after the Carter commission by writing, “The `take' portion of Canada's tax system (the revenue raising part) assesses tax on an individual basis.” There appears to be a new goal, and the tax system is being used to realize that goal.

Canada has the highest income tax rate in the industrial world. I'm probably not telling you anything you haven't heard before, because I'm sure you're going to hear a lot of these statistics over and over again as you cross the country. Still, I'll reiterate them.

Canadians pay 56% higher income taxes than the G7 average. The July 1998 Fraser Forum reveals that fully 48% of the yearly income of the average Canadian family is consumed by taxes, visible and hidden. Canada's various levels of government claim to spend their tax revenues for the good of Canadian families, but ultimately the large amount of tax revenue comes from families, families who presumably know their own needs much better than the government does.

I think even a committee of MPs will agree that most families' administrative costs are much smaller than those of government. As a result of high taxes, the average Canadian family has far less of its own hard-earned dollars to take home and raise the children, practically guaranteeing that two parents have to work to provide essentials.

In addition to the problem of high taxes, the tax system itself is structured so that double-income families pay far less tax than single-income families with equivalent income.

For example, in 1998 a two-earner family making $30,000 paid $3,492 in income tax while the equivalent one-earner family paid $4,317, which is 24%, or $825, more. That doesn't sound like a lot of money, but when you're in the $30,000 range, even $825 means the difference between having the freedom to go out to eat once in awhile, or go to a movie or something like that, and having to stay home, not to have any of those little extras.

In 1998 a family earning $60,000 paid $6,383 in federal income tax if it was a two-earner family but $10,300 if it was a one-earner family. At 60% more, that's $3,417. This discrimination against one-earner families holds up at every income level.

I'm sure you will have heard about the court case that Kids First, who will be testifying after us, had several years ago. These couples challenged the Income Tax Act under the equality section of the Charter of Rights and Freedoms, claiming it discriminated against one-earner families. They lost not because of the facts of the case—these couples had indeed paid more in tax than their two-income equivalents—but because, in the words of the Supreme Court justices, “The family is not a traditionally aggrieved group.”

No, but given the present situation, the family is quickly becoming a new aggrieved group.

As a group of women concerned for the family, we have consistently called on the government to allow one-earner families to claim the child care expense deduction. This would help keep mother at home if that is what the couple chooses to do. Income-splitting, or allowing the wife to file a tax return using a portion of the husband's income, is another solution that would make the system more equitable for all Canadian families.

The Canadian government has used the tax system to promote one choice, that of both spouses working outside the home, over that of one spouse working outside the home while one stays home to raise the children while they are young.

Dr. Hedy Fry, Secretary of State for Multiculturalism and the Status of Women, has stated in a letter the federal government's two objectives in the tax system.

The first is “to encourage a more equitable distribution of paid and unpaid work between men and women”. AFWUF believes it is not the government's task to determine who does paid and unpaid work. These decisions are within the domain of the family. It would require a massive intervention by the state into family decision-making to realize the goal of “more equitable distribution of paid and unpaid work”. The tax system is seen as an easy way to achieve a desired result by financially rewarding and encouraging approved behaviour while penalizing unapproved behaviour.

The second objective, according to Dr. Fry, is “to provide social and economic recognition of unpaid work that contributes to the well-being of society”.

• 0955

That sounds like a lofty goal, but AFWUF believes charitable, selfless caring for children at home precludes expecting direct payment. However, we don't believe that families, who at great expense choose to have one parent stay home with the children, should pay more tax on equivalent income or be forced through the tax system to subsidize the day care choice of the two-earner family next door through the child care tax credit.

The fact that this subcommittee is willing to listen to the concerns of all Canadians is to us a hopeful sign that these inequalities will soon be rectified. We would urge the government to treat all families equally in the tax system.

Our four proposals would be the following:

(1) make the spousal exemption equal to the personal exemption, because it is not now;

(2) base taxation on family income, through income-splitting or joint filing;

(3) convert the child care expense deduction into a refundable child tax credit for all children, regardless of where they receive their day care; and

(4) give homemakers access to an independent RRSP.

These changes would allow every Canadian couple to make the choices that are right for their family without financial penalty, even if their choices don't conform to a bureaucrat's or politician's view of the ideal.

I've brought a couple of members of our organization with us. They are directly involved in this issue, and I would like to introduce them, if I may.

Mrs. Tracey Lawrence is sitting at the back. Her little son Oliver has just been taken out of the room by his grandmother. He was being a little bit disruptive.

Tracey and James Lawrence are a young couple with one child, who's a little over a year old. James has just become a licensed mechanic. They have chosen to have Tracey stay home, without working. So they're very definitely a lower- to middle-income couple. They would directly benefit from any change to the tax system. Tracey is also expecting another baby in seven months or so.

The other member I've brought along from our organization is Kathy Woodward. Kathy and Joe Woodward have six children, and three of them are here with us—Beth, Ceci, and little Jane. Joe Woodward is a writer, and he has been an academic. They also are affected by the tax system.

I'm happy to have them here with me as an “exhibit A” of women. We have hundreds of women in our group who are suffering because of this tax system as it stands.

Thank you very much.

The Chairman: Thank you, Ms. Dykxhoorn.

We won't consider them as exhibit A for the purposes of this committee; we'll consider them as typical Canadians.

Voices: Oh, oh.

Ms. Hermina Dykxhoorn: They are, yes.

The Chairman: Thank you very much.

Colleagues, six minutes, please.

Mr. Paul Forseth: Thank you very much for coming. I appreciate that you brought parents with children to us today. I think as a society we need to continue to strive to make our public institutions or public forums much more friendly to children, wherever they are, whether it's the issue of breast-feeding in public or having children at various social occasions. We need a different societal attitude that we care and value for our children and accommodate them socially wherever they may be.

I'm very interested in your presentation. You've made some very pointed comments.

Before I ask you to flesh out some of the particular recommendations, I'm looking at page 2. In a general sense, you make this comment: “There appears to be a new goal and the tax system is being used to realize that goal.”

Can you spell out clearly what you believe that new goal is? I believe you're referring to somewhat of the appearance of social engineering or preference by government, which is implicit in its tax treatment. There may or may not be an ideological basis behind it, but when you look at the results, I take it that's what you're inferring.

So maybe you can just address that in a general sense, because ideas and philosophy eventually reinterpret the world and produce numbers and results and pragmatic effects, in the end, and right thinking produces right behaviour.

• 1000

I take it you're looking at the philosophical underpinnings here when you say there appears to be a new goal, and the tax system is being used to realize that goal. What is that goal, in your view?

Ms. Hermina Dykxhoorn: I think it's to make a benefit for those women, or those partners—it doesn't matter which sex, but generally speaking it's women—who choose to leave the home and work outside the home.

I'm basing those views on some correspondence and further discussions I've had with Hedy Fry of Status of Women.

I only used one comment here with the equitable distribution in society, but I could have used other comments she has made—for instance:

Allowing the taxpayer (usually the father) in a single-earner household to pay less tax by splitting income with a spouse (usually the mother) would not benefit the caregiver directly and could lead to less sharing of related responsibilities.

In other words, income-splitting would not put a cheque into the woman's hands and would make her dependent on her husband.

For us, that's not a problem. I mean, we are interdependent. We rely on each other. I rely on him, he relies on me, and in the great majority of cases, this works. So you're making a judgment on the fact that women must actually go outside the home to achieve economic independence. That's our view.

She has also said that income-splitting would reinforce “a division of labour that assigns the care of children to women, too often to the exclusion of other spheres of activity”.

To me, leaving the care of children to women is not a problem. Most women, if they do that, have chosen to do that. It should be their right, and it should not be punished or reinforced by the tax system. It should be a level playing field for whichever way you choose to have your children looked after.

I could quote you other quotes, if you'd like, but that's what we see.

Mr. Paul Forseth: Okay.

In your list of four recommendations, the third one says, “Convert the child care expense deduction into a refundable child tax credit for all children”, or families, “regardless of where they receive their day care.”

Have you thought down the road of how that might technically be done? The child care expense deduction, of course, is related to receipts, and the average family only claims about half of the possibility. If you don't have an identifiable expenditure, how do you assign numbers? Have you come up with some little system that could actually work?

Ms. Hermina Dykxhoorn: I'm not sure. I'm not a technocrat or a financial actual expert. I am basically a woman who cares about the family. I think it would have to be set up in some way that would be equitable for all.

Mr. Paul Forseth: Well, then, let's have a parent who decides to give up a career for 10 years and stay home. Is there any way, through this system, to provide some actual cash into the pocket of that parent who stays home?

Ms. Hermina Dykxhoorn: I don't see why there would be a need to do that if we had a fair taxation system. As I said in my talk, cash infusion is not something we think government should get into.

Mr. Paul Forseth: Okay.

We've heard testimony that a stay-at-home parent is not willing to take away the child care expense deduction for others but they want some recognition for their alternative choice. What I'm saying is, how do we actually deliver that without ruining the program, for one, which has certain laudable goals, and how do we provide the converse to so-called financially recognize the stay-at-home parent? Can we send them a cheque? How do we calculate the value of that?

Ms. Hermina Dykxhoorn: It would have to be decided as to what the value of that work was. I'm not exactly certain of what the details of it would be, but I think that's something that would have to be worked out.

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Mr. Paul Forseth: This is the problem we're in. The conundrum is in the details of how you actually deliver this. Philosophically, we can say we must, as a society and maybe in the numbers, try to provide some economic value to reflect our philosophical belief, but then how do we deliver it?

Ms. Hermina Dykxhoorn: We're just saying if a benefit is being given to one, it should be given to all. If it's taken away, then it should be taken away from all. The tax deduction for child care is what the other alternative would be, per child.

Mr. Paul Forseth: It would be somewhat of a return to the old system, where there was a basic deduction per child.

Ms. Hermina Dykxhoorn: Yes.

Mr. Paul Forseth: Do you have any suggestion as to how large that should be at the present time?

Ms. Hermina Dykxhoorn: What is allowed at this point? I haven't been in the system. We would have to decide as a society what that work was worth.

Mr. Paul Forseth: Okay. Thank you very much, Mr. Chair.

The Chairman: Thank you.

In Quebec we still get a tax deduction for children. Depending on how much it costs for expenses for schooling, for example, the deduction goes up. Maybe if the committee is interested, we can look at that model also to give us a base for discussion.

[Translation]

Go ahead, Mr. Cardin.

Mr. Serge Cardin: Thank you for your presentation. Your comments made me think about something that is important to all families. At some point, a couple chooses whether or not to have children.

Since we started this consultation process, we have drawn a distinction between persons of modest financial means and persons who are far better off. Often, when people suggest tax breaks, families need to have a certain income level before they can really benefit from these cuts. However, some parents earn fairly modest incomes and have trouble even making ends meet, and this can be a determining factor in their decision to have children or not. While a family may be very important to them, their financial position may prove to be an impediment.

As I was saying earlier, some of the recommendations that are made are beneficial only to persons with comfortable incomes.

As part of a comprehensive family policy, how could we also include persons with much lower incomes and fewer financial resources, persons who are also entitled to have children?

[English]

Ms. Hermina Dykxhoorn: On what we need to do with the tax system in total, I'm just making suggestions with regard to family tax. But on low-income Canadians, I've been made aware—I'm not certain what the statistics are—that people who make less than $20,000 or $25,000 are still paying tax. In some cases it's $1,000 or $1,500 a year. There has to be a way for those families and those individuals not to have to pay tax. But I didn't address that in this because I was dealing with specific family taxation systems.

I think you're absolutely right. There are Canadian couples and individuals who are making far less money and they're having a hard time making ends meet. That's why the total tax system has to be looked at. The taxation level is too high for those particular people. I didn't suggest that, but I could have. In other documents we have put out we've said below a certain level of income one should not be paying income tax. That's one thing, but it would be in an overall taxation picture. I think Parliament also needs to look at what taxes are doing to families and what high taxes are doing to families in a general way.

I don't know if that answers your question.

[Translation]

Mr. Serge Cardin: Yes, thank you.

The Chairman: Thank you, Mr. Cardin.

Ms. Dockrill.

[English]

Mrs. Michelle Dockrill: Thank you, Mr. Chair.

I think it's important to reiterate something my colleague Mrs. Redman spoke about with the last presenter. I think we'll all agree that as we travel this wonderful country we are clearly finding out that one size will definitely not fit all in terms of addressing the inequities within the tax system and as they relate to families.

• 1010

You made reference in your presentation to income-splitting. Quite a few of the presenters we've had to date, and most specifically women's organizations and women's groups, have talked about their concern with respect to income-splitting being a gender equality issue. I'm just wondering if maybe you'd like to comment on that.

In the same flavour, given the fact that we now know that 50% of the children in the country who are living in poverty come from lone-parent families, and income-splitting would not have any effect on those families, I just wonder if you want to comment on that.

Ms. Hermina Dykxhoorn: First of all, with regard to income-splitting and it being a gender equality issue, our organization doesn't see it as such. We see nothing wrong with a couple sharing income and having those assets together. We think at a certain time in a woman's life.... It mainly applies to women; I know of only one case of a man who's staying home and looking after his children, but it would apply to him as well. This would not be a degradation of gender or anything of that nature. That sharing is part of marital sharing, and that's the way it should be.

With regard to your last issue, what did you ask?

Mrs. Michelle Dockrill: Of the children who are living in poverty, 50% are—

Ms Hermina Dykxhoorn: In lone-parent families. The fact is that because a tax issue does not address one particular group doesn't mean it's wrong to do it. Things need to be done to help those individuals as well, of course, but because those individuals exist doesn't mean we shouldn't also deal with those people who are not in that situation. We need to deal with all groups across the board.

Just because we're mentioning and talking about income-splitting and things like that doesn't mean we don't want to see single mothers treated in an equitable way. We're just addressing the issues we've been asked to address, and those are the family issues and the issues we, as an organization, are concerned about.

Mrs. Michelle Dockrill: I think I'm hearing you say that you believe the inequities that presently exist cannot be solely fixed within the tax system. There are other issues—

Ms. Hermina Dykxhoorn: Especially the issues regarding single parents. Those are issues of family breakdown. As the speaker before me said—I just came in at the tail end of his presentation—a lot of those things cannot even be fixed by government. They're the human condition. We, as people, need to address those issues in our own personal lives. Government can only fix them sort of from a financial standpoint. We can't force people to stay together; we can't force them to break up. That's the human condition.

We need to realize that marriage is a very important factor in both the wealth and health of children. The last 30 years have proven, if anything, that marital breakdown has been very bad for children. I'm not saying I would force people to stay together, but I think as a society we have been rather flippant in sort of breaking up. Obviously there are very good reasons in some cases, in terms of abuse and all of that. I think it's possible there are some who could have been helped. But I think we're moving away from that because people have seen the terrible consequences there have been for children. But that's not something government can control.

Mrs. Michelle Dockrill: Some Canadian women, certainly some I've talked to with respect to income-splitting, have talked about their concern that it would be detrimental to their economic independence and their choice of economic independence. Do you agree or disagree with that?

Ms. Hermina Dykxhoorn: I don't really see how the income-splitting of some couples would be to their economic detriment, if they had the choice and the right to go to work and do their own thing. I don't see how taking away or giving the benefit to another segment of society would somehow detract from their ability and their right to live their lives as they please by going out to work and having a career. I don't see how the one follows the other. We can have both.

• 1015

At the moment, from Hedy Fry's comments, I can see that the one is receiving more of a positive reaction on the part of government. Very much of what you just said is Hedy Fry's viewpoint as to what she believes is good for women. There's a quote here too where that economic thing is mentioned.

To me, if women choose of their own volition to stay home and look after their children, that should be their choice and it shouldn't be penalized in the tax system. It should in no way penalize those women who choose to do the opposite. They can still do what they want to do. That's fine for them. They can move ahead with their careers without penalty, if that's what they want to do. But we're saying that others should have the option of staying home and looking after their children.

The Chairman: Thank you, Mrs. Dockrill.

Mr. Herron, please.

Mr. John Herron: Thank you, Mr. Chair.

First of all, I would like to thank you for bringing along exhibits one, two, three and four for everybody. This signals to me that this is very much a children's issue as much as it is as a taxation issue, if not more so. I think that helps to drive that home.

Ms. Hermina Dykxhoorn: Thank you. I only thought of it yesterday, and I rounded up two people overnight.

Mr. John Herron: I found it to be relatively successful in that regard.

On the comments you made earlier, I'd like to share with you what I've heard from numerous of my constituents and friends as well. Where you knew of one situation where the male was the person who stayed at home, I'd argue that in the new economy, where information technology will actually drive some of the new era, you will see the female in the relationship have just as much capacity to move upward in her career. If that's the choice for the team or the family unit, the other one may stay at home. That will happen more commonly.

I also concur with your comments that the tax code overall has to be revisited to address some of the inequities, such as one-parent families.

I have one question. I think this is a children's issue. Your first comment was to make the spousal exemption equal to the personal exemption. Could I make a segue and add “when there are children involved”? Let's say in my situation—I'm not fortunate to have children at the moment, but I'm still a young fellow—I don't necessarily think we should extend that to situations where children aren't involved.

Ms. Hermina Dykxhoorn: Thank you for asking that, because it's a very important point when we look at this. I'm not saying this on behalf of my organization, although I think most of them would agree with me. There should only be benefits when there are children. I think in this day and age obviously women have the capacity to be out in the workforce. It's fully accepted and even encouraged, and that's good. So there shouldn't be benefits for those couples who either have no intention of having children or even those who are incapable of having children, for whatever reason. Benefits should really go to those who produce children. The children are the ones we should be concerned about. Women can manage generally out in the workforce and so on.

I think you're quite right about that. Obviously I'm saying if there are children in the home, these are the suggestions we would make so women or men who stay home with their children would not lose out economically because of that.

Mr. John Herron: I think this debate should be about fairness and having choice. Certain families will determine the best way to provide for their children. They should be able to make the choice, from a fairness perspective, whether it's best to have direct parental care, or seek care from a third party.

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I'm reading from the government's response to the communications of Beverly Smith from the United Nations Commission for the Status of Women. When the government refers to the income-splitting situation, they come from a gender equality perspective:

...income-splitting between the parent in the paid workforce and the stay-at-home parent raises several concerns: (a) it discourages sharing of unpaid work between women and men; ... (e) it would require the establishment of an employer-employee relationship between spouses, with the male partner most often being the “employer”.

I find that a little bit odd from that standpoint. It almost infers that if you increase the amount of money available in that regard, women will automatically choose not to pursue careers and will all run home. I don't really think that's the case, because we've heard testimony that regardless of level income, we see the same percentages of women participating in the workforce.

Ms. Hermina Dykxhoorn: Yes, that's right. It's a little more complicated than just changing the tax system, of course. There will be some women who may stay home.

This morning I was on Calgary Eyeopener, the CBC program, about this very subject, and before the show Jeff Collins said, “This is very interesting, because most of my friends are what I would consider feminist women who are pursuing careers, and I was so surprised when we discussed this.” I guess he must have been somewhere over the weekend and said we were going to be discussing this. He said the majority of them said they really would like to be home with their children.

So there will be women who will choose to stay home for a few years with the children they've had. That's a possibility. But for those who don't, I don't think it will stop them. I think they'll move ahead with their careers, certainly.

Mr. John Herron: Thank you.

The Chairman: Thank you, Mr. Herron.

Mr. Szabo, please.

Mr. Paul Szabo (Mississauga South, Lib.): Thank you for your presentation. I think you're going to get a lot of support from this committee for your spirit and your thinking principles involved here.

Ms. Hermina Dykxhoorn: Thank you.

Mr. Paul Szabo: We're searching for equity in a way that certainly makes fiscal sense, makes social sense, etc.

Many people have said “Here's how you could do it.” We've discovered there is no simple solution and it's going to be very difficult to reconcile all the hodge-podge of different ways in which people can benefit or get some sort of tax expenditure their way.

With regard to the spousal exemption, the spousal non-refundable tax credit, the spousal amount, a number of people have recommended to just move that $5,380 up to $6,456, forgetting about the fact that we've just had a $750 increase in the last budget that will be coming. One of the small parts in there is that with regard to the spousal amount, that spouse working in the home gets to earn $538 of income before the transfer amount is reduced. So the two amounts are actually not comparable dollar for dollar; there's another twist to the spousal amount.

Ms. Hermina Dykxhoorn: I know. It's complicated.

Mr. Paul Szabo: The second issue with regard to that is, should you increase it, the increase would also extend to childless couples and to empty-nesters. It would cost, I'm told, $430 million to do it, and probably only about half of it would have anything to do with parents who provide care in the home, so it's not an efficient target hit. We have to work on that.

On the income-splitting thing, if you simply look at a scenario where there's a stay-at-home parent, with income-splitting, you can look at your own situation and say, “If my husband is paying an effective rate of 26% federal and he's in the mid-range, splitting it will bring us down to the low range and we'll save money.”

But you also have to understand that if you have income-splitting between spouses, for instance if one family has a $30,000-earning spouse and one at home, income-splitting does nothing for them, because that person is already at the lowest possible tax rate, and splitting income would only split it into two smaller pieces, which are still taxed at the same rate. So you do nothing for the people who probably need it more than anyone else.

• 1025

People in the middle would basically split a 26% federal tax rate down to 17%. Sure, there's a benefit there for the middle-income bracket, but the highest possible savings would come from the highest possible earners, because they're at a 29% federal rate.

So income-splitting actually is regressive. It benefits higher-income earners over low, and that generally is not a good idea. It also would be quite expensive, a tremendous loss of revenue, and really not hit the target very efficiently. So although part of it has some good consequences, there are some unintended consequences that we have to be careful of. Similarly, with converting the child care expense deduction, I'm not sure if most Canadians know this, but I think from our report we're going to be able to provide them with information that says there are four million families in Canada with children under age 18, and of those almost two-thirds, roughly, about 3.2 million families, have the opportunity to claim the child care expense deduction because they have two-income families.

But in 1996, which is the last year for which we have the data from Revenue Canada, only about one-third of the families who could claim the child care expense deduction actually claimed it. Now it's something like 759,000 taxpayer families that file for the exemption out of 3.2 million. The average claim in the 1996 tax year for the child care expense deduction was $5,000 for preschool and $3,000 for school age. Notwithstanding, the average claim was only $2,600, about half of what they could have claimed. The average benefit to a family claiming the child care expense deduction was on average about $700.

Ms. Hermina Dykxhoorn: I think what that shows, of course, is that people know that institutional day care is probably not the best for their children. Most people would choose to have their children with a family member or a good friend, or would, as many, many families do, split their working hours between the two partners so that one can be home during the day or even during the evening or whatever.

But I think you're right. That shows that Canadians are not using that system as much as they possibly could, but it also shows that Canadian families are pretty smart.

Mr. Paul Szabo: I think a lot of people say “Wow, in today's tax return you can get a $7,000 deduction”. Well, the history shows that people don't use it anyway.

Ms. Hermina Dykxhoorn: Right. I know that.

Mr. Paul Szabo: We have the informal care, and interestingly enough, a lot of people are talking about unreceipted care, that as long as you don't get a receipt or they don't declare the income.... What we're really talking about is tax evasion.

Ms. Hermina Dykxhoorn: Of course.

Mr. Paul Szabo: It's fraud. It really is fraud, and—

Ms. Hermina Dykxhoorn: Yes, but considering that the tax rate is so high.... I'm not saying that it's right to do so, but we're asking for problems when the tax rate for families is so high. You're begging them to find some way—

Mr. Paul Szabo: I suspect that a number of people, when they see the information, will recognize that the current system of the child care expense deduction has some flaws in itself. It values high-income earners over low as well, because you get the deduction based on your marginal rate. A high-income earner is going to get a refund cheque of $3,500 for spending $7,000. A low-income earner would only get say $350 for the same amount of expenditure. So it's also regressive. We've got to deal with it. It's not just simply let's just—

Ms. Hermina Dykxhoorn: No, I know it isn't.

Mr. Paul Szabo: On the last one...here's where I want your opinion.

Ms. Hermina Dykxhoorn: Yes.

Mr. Paul Szabo: You're talking about RRSPs. What you're really saying is that unpaid work is still work; it deserves to be recognized, and how about a little consideration on the pension side. RRSPs are obviously based on prior years' income to determine how much you can contribute. The real value of them is to defer taxes, and that's why you really need earned income to have the dollar of an RRSP. So pragmatically, I think RRSPs for stay-at-home moms probably is not a more efficient thing.

But how would you react to the possibility of having parents who provide direct parental care for a certain period be able to earn the entitlement to buy back Canada Pension Plan benefits that they've forgone? For instance, if they were out of the paid labour force for a year, when they returned to the labour force, or later on when the family was more stable and had some cashflow, they could buy that year of CPP benefits.

• 1030

Ms. Hermina Dykxhoorn: That's another solution for that problem. I hadn't thought about it. We haven't talked about it as an organization. But it's certainly worth discussing, because all of these things that you're raising...just because certain things aren't perfect.... Obviously we're talking about and suggesting some changes, and saying that those changes are not going to be the most perfect changes doesn't mean that the system, as it stands, shouldn't be fixed. That's what I think. Those are the best guesses that we made on the situation, based on our membership and what their needs are. But we will certainly look at other suggestions, and that suggestion you made sounds like it would be good.

The Chairman: Thank you very much, Mr. Szabo.

You may ask a very short question, Mrs. Redman.

Mrs. Karen Redman: Thank you, Mr. Chairman. I need to make a very short comment too.

The Chairman: You didn't ask for that; you asked for a short question.

Mrs. Karen Redman: I really appreciate your comments, and I appreciate that you're bringing forward a point of view. I have to react on the institutional child care and the lack of uptake on the write-off. Having been president of five child care centres in a previous life and looking at the long waiting lists, knowing the calibre of the staff we had and the flexibility we afforded parents, I really think that's an unfair statement to tacitly say that institutional child care is somehow second rate or secondary. There were a lot of parents who wanted to get into our site-based child care systems, especially for school-aged children. We simply couldn't accommodate all of them. So I would agree with your closing comments that it's a very complex issue. I don't think it speaks to the calibre of institutional child care.

I realize that Mr. Herron made the comment that this is a child issue, and in some ways it very much is, but I think that also because the child care giver is often the female in the couple, sometimes you would see it as a women's issue. One of the things Status of Women asked us to consider was dependent care. When you look at the statistics, an awful lot of women are in the midst of rearing their children, are in the workforce, and are also looking after disabled, dependent, or ailing elderly members in their family.

In your context, have you ever looked at that kind of squeeze and the kind of dependent care that women are providing to people other than children in the family unit?

Ms. Hermina Dykxhoorn: It's certainly come to our attention because it's happening more and more, and people are being asked to care for their elderly parents at the same time they're still raising their own children, usually of school age. But I guess our organization is an organization where we see that as being a natural part of being a family. And you know, as little government dabbling in that as possible is what should be. To me, that's just a natural thing about being part of a family, and it doesn't necessarily require the hand of government.

Mrs. Karen Redman: The $400 that is allowed in the tax system currently for people providing dependent care to ailing or disabled family members isn't necessarily a good thing, in your view?

Ms. Hermina Dykxhoorn: It's obviously not a lot of money, so it really doesn't make that much difference, and I believe that families should look after families with as little government interference as possible.

The Chairman: Thank you very much, Mrs. Redman.

On that note, I would like to thank you for your valuable input on a very difficult subject.

Ms. Hermina Dykxhoorn: Thank you, Nick. Goodbye.

The Chairman: We wish you good luck, and thank you to the junior exhibits, especially.

• 1040

We have a little problem with our next guest, so we're going to switch hours if the other person can get here in time.

I'd like to welcome Ms. Heather Gore-Hickman, who is testifying on an individual basis. We'd like to proceed immediately. You have about ten minutes to make your presentation, and then we would welcome questions from members.

Ms. Heather Gore-Hickman (Individual Presentation): Okay.

I have a ten-minute summary of the paper that I hope has been distributed to each of you.

The tax burden of Canadian families is unduly influenced by personal choices made with respect to work and child care arrangements. The portrayal of the issue as one that concerns only single-income families is a misrepresentation of the broad discriminatory impact of the tax system. Those who bear the harshest discrimination are single-earner two-parent families, representing 44% of all families with children.

Those who enjoy the most favourable treatment are dual-income families with two roughly equal incomes, taxed in the same marginal tax bracket, a group representing only 11% of families. Of these families, some enjoy further tax concessions by accessing the child care expense deduction.

The majority of dual-income families are burdened by varying degrees of the same elements of discrimination imposed on single earners. Most families have no hope of achieving the optimal tax treatment, where both spouses are taxed in the same marginal bracket, due to the limitations of income-earning potential of caregiving or traditionally female occupations relative to traditionally male occupations. Decisions with respect to pursuing a second income are usually impacted by considerations about care of dependent family members.

Mitigating the inequities requires policy changes in two area. Firstly, there should be some universal recognition of the costs of providing for dependent children. Secondly, the tax system must focus on equitable taxation of comparable family incomes.

The Investing in Children and Valuing Our Caregivers report states that there is no rational justification for the tax discrepancies between families making different child care choices, and that policies should be fair and equitable and neither penalize nor compel specific caregiving choices. Sadly, in his 1999 budget Mr. Martin chose to ignore the recommendations of a committee of his own caucus.

The Department of Finance is in possession of much documentation describing not only the nature of the inequities, but also, in some cases, the government's defences of the discriminatory policies. The inequities have been recognized by academics and media that cross all partisan positions. Mr. Martin has a history of wasting taxpayer dollars by striking committees to address taxation issues, both personal and corporate, and ignoring the recommendations of those committees.

To level the playing field for Canada's children, the government must begin to make substantive changes. While it is impossible to have policies that are of neutral impact to all choices families make about paid and unpaid work and child care arrangements, rationalizations as to whether the discrimination is justifiable turns children into pawns in a game that plays with their well-being.

Appendix A of my report highlights the continuum of discrimination experienced by single- and dual-income families making differing choices with respect to work and child care.

Appendix B describes the flawed logic and inaccuracy of the government's take-home pay analysis, along with a more relevant analysis demonstrating the indisputable discretionary income disadvantage of single earners. The CCED is a legitimate expense of earning income that benefits only 17% of families. I do not advocate abolishing the CCED; however, there must be some equity and recognition of the cost of child rearing borne by the 83% of families currently unable to access any tax concessions.

• 1045

In its current form the, CCED is flawed. Marginal rates impact the amount of benefit retained. Most claimants have relatively affluent family income. Only a privileged few can deduct the cost for expensive dance classes, piano lessons, golf camps, and school lunch programs for 16-year-olds. A CCED claim entitles the family to more child tax benefits. Professionals that income-split with their homemaker spouses can deduct the cost of a nanny. It would be no solution to take the CCED away from the wealthy, who already pay more than their fair share of taxes and whose votes must be considered in policy development. However, the CCED should not be misunderstood as a tax concession that is providing broad relief to families with children.

Although 40% to 50% of families earn dual incomes and choose child care arrangements other than commercial care, the government has ignored these families in defence of the discriminatory tax policies that have been put forth. Tax policies that favour non-parental care contravene the spirit of human rights conventions signed by Canada, which state that a child is entitled to care by parents wherever possible.

The taxation of couples issue is inextricably linked to care decisions for both children and other family members. The lower of discretionary income of families that bear higher tax burdens at comparable family incomes unjustifiably penalizes the children of those families. It has been argued that our system of individual taxation avoids the so-called marriage penalty. Because the system ignores economic reality, it simply imposes a penalty on 89% of families in the form of higher marginal and overall taxes because they have either one income or two incomes taxed at different marginal rates.

Many dual earners choose a part-time versus full-time second income to accommodate caregiving arrangements, especially during the demanding preschool years. Only 35% of children have parents earning dual full-time incomes. Women comprise 70% of part-time workers, earning on average $10,400 per year. Most of them bear a family tax differential almost as harsh as that borne by single-earner families.

The average income of women in Canada is a meagre $20,902. Instinctively nurturing, 70% of women are drawn to caregiving work, which pays poorly relative to traditionally male fields. Because no value is ascribed to unpaid caregiving work, employers place little value on such performed in the paid sector. Consequently, all but 11% of families are doomed to bear an inequitable tax burden, because most women choose fields of employment that would never compensate them at a level of income equal to their spouses. These women, along with women in single-earner families, have less after-tax income to provide for their children and their retirement. The growing feminization of poverty is a consequence. The spousal credit communicates that a spouse's contributions to the family are worth less if he or she engages in unpaid work in the home full time.

Families think of their income as family income, not “yours and mine”. The government bases many policies on family income, but persists in collecting tax based on the individual. Ability to pay should recognize not only the income earned, but also the number of people dependent on that income. Progressivity could be preserved and families treated more equitably if there were per capita deductions for family members and the family was the unit of taxation. Children would become the average household's best tax shelter.

Relieving the economic stress of the higher tax burden families bear relative to single taxpayers and childless couples would lead to fewer marital breakdowns and, in turn, fewer children in poverty. The application of progressivity in other G-7 countries is much flatter. There has been broad academic and media support for the flat-tax plan adopted by Alberta. Such a plan would avoid the marriage penalty problem and could be structured so that all taxpayers would be winners. A flat tax with generous personal exemptions would continue to consume a higher percentage of the income of the wealthy.

Families today are dynamic. Over the past 20 years, employers have offered a steadily expanding menu of options around flexibility and choice to help parents achieve balance. Regrettably, our government has not kept up with the times in respecting the myriad choices families make today.

The fact that the proportion of dual-income families has declined from 62% to 56% since 1990 would indicate that even the enticement of a low marginal rate of tax on incremental income and the subsidization of commercial care does not promote a second earner's attachment to the paid workforce. With the variety of care and work options available to parents, it is futile to attempt to achieve equity by targeting parental activity.

The Chairman: May I interrupt a minute and get you to slow down a bit. I don't think the interpreter can—

Ms. Heather Gore-Hickman: She can't keep up with me?

The Chairman: Not at all. Take your time, please.

Ms. Heather Gore-Hickman: All right. I've almost finished.

Solutions lie in targeting children—you've all heard this so many times; that's why I'm trying to fly through it. The government ignores the fact that even without outside child care, kids create big bills. Universal recognition of these costs would achieve some measure of treating all children equitably. Other countries, such as Australia and the United Kingdom, have introduced tax reforms that have returned fairness to families. Canada is the only western industrialized nation that does not offer some universal recognition of the cost of raising children.

• 1050

Single parents comprise approximately 22% of families with children. Most single mothers are poor and are not given a choice about participating in the paid workforce. Most choose non-receipted care arrangements. Despite the unsatisfactory outcomes of workfare programs, these mothers are denied the choice of providing direct parental care. If the caregiver tax credit included the care of healthy children, the only caregiving work in the home that was excluded from the credit, many single mothers would have benefited. If the equivalent-to-spouse credit were increased to match the personal credit, single parents would be the sole beneficiary. Low-income parents experience the same elements of discrimination as two-parent families. It seems ridiculous to tax low-income families only to remit child tax benefits later. Now is when these families need the money. Low-income families can experience marginal tax rates of over 70%.

Although not phasing out until family income levels of about $70,000, the aggressive clawback of the child tax benefit program at levels above $21,000 leads to substantive assistance only being received by the truly low-income families the program was created to help.

In summary, to encourage future productive taxpaying citizens, there should be some universal recognition of costs all parents incur raising children. Doing more than paying lip service to the espoused value the government places on children and caregivers requires that family income be taxed more equitably. In this era of budget surpluses, the projected costs of the various private and public sector solutions that have been proposed are affordable. Solutions should let families keep more of what they earn, rather than introduce new government spending.

Raising thresholds and reducing marginal rates, while welcome, will not address the underlying discrimination. New spending for a children's czar or early childhood development in place of equitable tax relief for families will only serve up more frustration. State-provided care has proven to be prohibitively expensive in countries that have introduced such programs. Incentives to encourage parental attachment to the workforce should not be misconstrued as a solution to discrimination attributable to care choices or income differentials.

Parents need relief from debilitating taxation, not more government intervention in raising their children. The tax system requires broad reform, rather than more tinkering. As has been encouraged by the health and justice departments, solutions should work toward equivalent tax breaks for all choices of care. Any forgone tax revenues should be viewed as an investment in human capital, resulting in a stronger future tax base and reduced health and social costs.

As stated in the Caregiver Report, social policies should presume that parents, not governments, are in the best position to make decisions affecting children and that the government should seek to provide as much flexibility and as many options and choices to parents as possible.

Thank you very much.

The Chairman: Thank you very much for that brief. It was well thought out. We can see you put a lot of work into it, so I didn't want you to rush through it.

Colleagues, six minutes, please.

Mr. Paul Forseth: Thank you for coming today and presenting a very good brief.

I will ask you a specific question in view of the child care expense deduction, which is about purchased day care you get receipts for. We've heard a lot of testimony about the converse. What would you do to generally recognize the same kind of care, but it being done in the home by a parent and you can't get receipts for it, you can't attribute a value to it? There has been a general comment that we need to recognize somehow in the tax system, the income tax form returns, that alternative. While not denigrating or wanting to take away the child care expense deduction, socially we have to recognize the converse of the same kind of care being given for kids, but it being done in the home by a parent rather than being purchased outside the home.

The problem comes down to how do we technically deliver it? How do we work it? If you cast your mind down the road as to saying philosophically we should recognize that view or that method of child care, then how do we actually do it? Have you figured out some kind of a system of maybe sending a cheque to the mother or the father who stays home? Have you tried to figure out how we could simply deliver that social goal?

• 1055

Ms. Heather Gore-Hickman: I'm not an expert in this sort of policy development. We have had programs in our history that have delivered universal recognition. The family allowance is one example, and we had a dependent child deduction, which was a personal deduction that was abolished in 1993. Those were two effective means of delivering recognition universally to families. They of course were folded into the child tax benefit, which was established to provide funds to families in need of support.

There have been attempts to try to quantify expenses that families incur in the home during the hours that children are in commercial care. There have been efforts to quantify that there are incremental costs of maintenance in the home, utilities, food, and that there are out-of-pocket expenses families incur. There's recognition that someone running a home day care can deduct part of their property taxes and conduct expenses of running their home day care service. So I think it would be an unreasonable burden to try to compensate families for all of the expenses of raising children, because every family makes different values—

Mr. Paul Forseth: So if it's not all, then do you have in mind maybe a number?

Ms. Heather Gore-Hickman: It seems to me that at the time the dependent child deduction was abolished, it was about $3,500 per child. The C.D. Howe Institute has proposed an amount of $2,000 per child, which combined with retaining the child care expense deduction would lead to I think costs in the area of about $3 billion. So I'm not going to begin to propose what amount is appropriate. I think we can start taking steps towards giving some recognition of the costs that all families bear.

Mr. Paul Forseth: Yes. Thank you, Mr. Chairman.

The Chairman: Would that be a tax credit, or an exemption for children?

Ms. Heather Gore-Hickman: There are pros and cons to deductions and credits. If a deduction is going to unfairly benefit the higher-income earners, then a credit has the problem of whether you have earned income.

The Chairman: The $2,000 you referred to from C.D. Howe, was that—

Ms. Heather Gore-Hickman: It was a deduction that C.D. Howe has proposed.

The Chairman: A deduction. Thank you.

[Translation]

Mr. Cardin.

Mr. Serge Cardin: Good morning and welcome. I'm sorry I missed part of your presentation and I haven't had time to read your entire brief. On page 8 in appendix A, you compare the different income levels of two spouses. The net income after taxes appears on the bottom line, but I don't believe you took into consideration child care expenses incurred by parents who claim the deduction. In this particular example, what were the parents paying for child care?

[English]

Ms. Heather Gore-Hickman: If you read elsewhere in the paper, I provide an analysis in appendix B that basically should be read with this analysis. I use the province of British Columbia because the numbers came to the same amount of taxes and after-tax income as Mrs. Fry's calculations at Status of Women Canada prepared on the comparable analysis. I've laid out my analysis of the inaccuracy and have demonstrated that if recognition were given to the costs incurred in the home, the incremental expenses, that more than offsets the supposed after-tax advantage Mrs. Fry's calculations had shown. I think that's what you were working toward in wanting to see this carried on.

Later on in appendix B I give an analysis of the fact that Mrs. Fry was using $8,000, and I think her assumption was two children over the age of seven, so that would be $4,000 per child. There are very few after-school programs that would add up to $4,000 per year of additional costs. I did an evaluation of child care costs in downtown Calgary at a number of day cares, and I dispute the $8,000 average. If that's the cost she's using for children under seven, I could hardly find an example of a day care that charged that much.

• 1100

To try to take this analysis further, it has to acknowledge costs inside the home that are out of pocket and it has to give recognition to what a reasonable average expense would be for commercial care.

[Translation]

Mr. Serge Cardin: Therefore, one could assume that in the case of E, because of child care costs, the after-tax, after-expense incomes would be substantially the same.

[English]

Ms. Heather Gore-Hickman: No, not after tax. There's about a $7,000 difference between the highest and the lowest.

[Translation]

Mr. Serge Cardin: What I mean is that once child care costs are subtracted in the case of E, the incomes, after taxes and child care expenses, are substantially the same. That is the price persons must pay if they wish to send their children to daycare and earn a living outside the home. Child care costs represent a major expense.

[English]

Ms. Heather Gore-Hickman: Let me say one more thing then. As I said earlier in my paper, the families represented in this chart that have outside receipted care expenses only represent 17% of families—877,000 families out of 5.1 million families with children. So even though we have a significant percentage of families that are dual income, they are not incurring those out-of-pocket commercial expenses.

[Translation]

Mr. Serge Cardin: I didn't hear the interpretation at all, but I won't ask you to repeat your answer.

The Chairman: Do you want her to repeat her answer?

Mr. Serge Cardin: I have an idea what she said. Don't bother. Thanks.

The Chairman: Thank you.

Ms. Dockrill.

[English]

Ms. Heather Gore-Hickman: Would you like me to repeat the response?

The Chairman: No.

Ms. Heather Gore-Hickman: Okay. Sorry.

Mrs. Michelle Dockrill: Thank you, Mr. Chair.

You made a comment with respect to a reasonable child care expense. Can you give me some idea of what you have found to be a reasonable child care expense, on average?

Ms. Heather Gore-Hickman: No. I'm not an expert in that area. Do you mean a reasonable child care expense for out-of-pocket care within the home or for a day care?

Mrs. Michelle Dockrill: Yes.

Ms. Heather Gore-Hickman: On appendix B I've shown the costs for infants, toddlers and preschoolers at several day cares in downtown Calgary. That should be representative of what the average is.

One point I make is with respect to infant care. Only 35% of preschool children have both parents in the full-time workforce. So when you're looking at a reasonable average, it has to bear some relationship to whether it's full-time care or part-time commercial care. It would be a huge undertaking to try to analyse it.

Even with the child care expense deduction, there's no mechanism for the family to input what its costs are over and above what the deduction is. But the fact that the deduction is only an average of about $2,600 per claim indicates that if families were claiming the full $5,000 and $7,000, the average child care expense deduction would be significantly higher. So it infers they're either paying a lot less for commercial care or there's a lot of part-time care out there, which there should be, because 70% of the paid workforce is women.

• 1105

Mrs. Michelle Dockrill: That brings me to my second question. I think you said 877,000 families did not incur child care expenses.

Ms. Heather Gore-Hickman: That many are claiming them.

Mrs. Michelle Dockrill: Do you have any idea what role informal non-receipted care plays in that?

Ms. Heather Gore-Hickman: I know a significant number of home day cares are in the underground economy. The finance department does not seem concerned about that because there's no net cost to the treasury. They're not collecting tax from the caregiver and they're not paying out a child care expense deduction. To the extent that those families are denied access to any recognition of the costs they are bearing, they're experiencing discrimination as well.

Mrs. Michelle Dockrill: My concern is it's not necessarily that they're not incurring the expense. They're just not claiming it.

Ms. Heather Gore-Hickman: I recognize that and acknowledge that in my paper.

Mrs. Michelle Dockrill: I've just gone through a personal experience of six months of trying to find child care for an infant, and I had a difficult time finding somebody who was willing to allow me to claim the expense.

Ms. Heather Gore-Hickman: Right. That speaks to something Mr. Szabo was addressing with the previous witness. The correct system is perceived as unfair and when the system is not perceived as fair, people feel freer to try to circumvent the system and not comply. That's clearly one of the problems we're facing.

Mrs. Michelle Dockrill: I'm just wondering, given the fact 50% of children living in poverty are coming from lone-parent families, if you think that's playing a role with this unreceipted care. Some of those lone parents who are on provincial assistance would have it clawed back if they acknowledged that additional money.

Ms. Heather Gore-Hickman: Well 22% of families with children are single-parent families, so they have concerns, to the extent I have been able to evaluate the system. They are faced with the same elements of discrimination. I've spoken to the outrageous effective marginal rate that low-income earners effectively pay. If you can only keep 30¢ out of every additional dollar you earn, you're never going to claw your way out of being a low-income earner.

Mrs. Michelle Dockrill: Thank you.

The Chairman: Thank you, Ms. Dockrill.

Mr. Herron, please.

Mr. John Herron: Some advocates say a better way to re-establish the fairness within the system, in terms of the child care expense deduction, is to have a refundable tax credit that would be universal and tied to children. Is that something you would advocate?

Ms. Heather Gore-Hickman: Sure. It's effectively a handout from the state when it becomes a refundable tax credit. You get it whether you earn income or not. Mr. Szabo has previously addressed concern for farm spouses, and a refundable tax credit would certainly meet their needs.

I see it as little different from something along the lines of a family allowance. It would be outside the tax code. There are a lot of advocates for simplifying the tax system and taking these sorts of funds or payments outside the tax system. I'm an advocate for simplifying the tax code. There's some perception that if it is within the tax system, to the extent taxpayers actually earn income and pay income tax, it is perceived as less of a handout. But in practicality, it's the same thing.

Mr. John Herron: Numerous studies have proven that the first three years of the preschool period are much more critical in the child's development.

Ms. Heather Gore-Hickman: Correct.

Mr. John Herron: If you were to go down a route similar to the family allowance avenue and have it heavily weighted—maybe not exclusively, but perhaps that would be for public policy groups to debate—with the emphasis on preschool children, is that something that would, in your opinion, be better received by the public, if it were a universal program? Because it would actually be more substantive than perhaps....

• 1110

Ms. Heather Gore-Hickman: Sure. I would be in support of that. Those are the critical years. Statistics bear out that by the time children are in school, the proportion of dual-income families takes off again and increases substantially. So during those critical formative years, that would certainly be a practical place to target.

But I have to also say that children get more expensive the older they get. Again, you speak to family values and decisions about what a family chooses to purchase for its children or whatever, but I wouldn't give up just at the preschool level.

But if you're looking for political will, I think there would be broad support for targeted relief at least for preschool children.

Mr. John Herron: Okay.

Thank you, Mr. Chair.

The Chairman: Thank you, Mr. Herron.

Mr. Szabo, please.

Mr. Paul Szabo: Thank you, Heather, for your presentation. I've seen other work you've done on this, and I know your concerns are shared by a lot of people.

Since you're a CA as well, maybe you can give some perspective to this whole idea of comparing two different families with a different configuration of the same level of family income, and showing that somehow there's a differential between them.

A two-earner family has to pay two CPPs and two EIs. There's a notional employment expense that a one-earner couple would forgo for one of them. Also, as you pointed out, the child care expense deduction amount for the child is substantially more than apparently is being claimed by actual taxpayers.

I've always thought the real economic analysis has to do with a couple who is working and who then have a child. Then they must work out for their family what it means to continue to work in the paid labour force and hire someone to provide child care, compared to if one of them withdraws. No matter how I analyse this thing, it seems to me that regardless of what child care costs they may face, there still is a net income or an opportunity to earn economic gain when both work.

Ms. Heather Gore-Hickman: An economic which?

Mr. Paul Szabo: Gain. There's a net income. If I make $20,000 and spend $4,000 for child care, after taxes, I still bring home $12,000. That economic gain is forgone if I provide direct parental care.

But there's another intangible, and this is where the social and the fiscal meet. Maybe you can add to the list, if you have anything to add. Not only have you forgone income by providing direct parental care; you've probably forgone opportunities for career advancement and you've forgone pension entitlements that you might have been able to earn to build up your pension. The child-rearing dropout does not help that situation. Compared to other couples where both parents work, you probably are providing more volunteer, charitable, and neighbourhood service, etc., much more than simply child care for your own child.

Was the economic analysis that was floated around by C.D. Howe and by Status of Women in their UN response an appropriate comparison to make, or would you suggest that looking at an individual family and doing the economic analysis of its own choices is more valid?

Ms. Heather Gore-Hickman: You've brought in so many points.

The Status of Women analysis was irrelevant. A number of commentaries in the media addressed that, and I've tried to address it here.

Families that do make the decision to pull back, either to a single income or to minimal employment during the child-rearing years, end up paying for that for the rest of their lives in terms of their inability to provide for their retirement.

• 1115

You addressed the dual CPP and EI payments that the two-income families make. They get something for that second set of payments. They get employment protection and they can enjoy a double retirement pension. In your wonderful caregiver paper, you point out that if a woman is making $18,000—and we know the average income earned by women is $20,000—if she has two children in commercial care, her net take-home is zero.

It's tough being a woman in this country unless you make choices like the one I've made, to be like a man.

Mr. Paul Szabo: You don't want to be like a man.

Ms. Heather Gore-Hickman: No, I don't, but there are a lot of complicated things here.

Mr. Paul Szabo: This is my last question.

You're aware that there are a number of ways in which we can deliver benefits to Canadians with regard to children. People have talked about all kinds of things, and some exist. Say we were to address the blunt question people have been asking: Is there an inequity in our system, whether it be taxation or otherwise, that dual-income-earner families get some subsidy, and the equivalent benefit or some notional benefit is not attributed to those who provide direct parental care? Would it be your recommendation to try to massage the existing programs to deliver that benefit, or would it be wiser to come up with a single, focused benefit for a direct parental caregiver, such as a parental care benefit similar to the caregiver benefit that was introduced in 1998 for those who provide care in the home to an aged parent?

Ms. Heather Gore-Hickman: Which is a very minor benefit.

Mr. Paul Szabo: But it's something.

Ms. Heather Gore-Hickman: It is something; that's right. But again, I wouldn't want that to be held out as something that's giving broad relief to anybody. Basically your family income has to be below $13,850 or something like that, so it's a very minor benefit.

As I've said, I would like to see targeted relief directed at the existence of children. It's futile to try to target parental activity. Women move in and out of the workforce. They make different choices. Family circumstances change. Their caregiving arrangements change. Their husbands' situations change. It's futile to try to target parental activity.

The existence of children creates expenses. The child care expense deduction is a legitimate expense of earning income. That's a business expense. Children should not be treated as a business expense. Children, by their very existence, create big bills. Families that have commercial care incur expenses in their home outside the time their children are in commercial care. Recognition of the existence of children is the most fair approach to take.

The Chairman: Ms. Redman, please.

Mrs. Karen Redman: I concur with your statement on page 5 that simplifying the income tax system would be really commendable. What I find problematic in that second-last paragraph is how you seem to think a flat tax would in any way be a panacea.

Assuming gender neutrality, the people in the top tax bracket, while they only comprise 13% of all taxpayers, actually pay 37% of all taxes and give 42% of all charitable donations. So if we're assuming income tax neutrality, it seems to me there's no way of avoiding hammering the middle class, which is the problem I see inherent in a flat tax. The middle class, the people who were here crying out for personal income tax relief, are the very people you would demand more taxes from.

Ms. Heather Gore-Hickman: I am trying to lay out options, so I'm recognizing something Alberta has done. Through the mechanism of high personal deductions, personal exemptions, they are removing a significant percentage of low-income earners from the tax rolls altogether, and because of the existence of those personal credits, there is still progressivity that would see the higher-income earners paying a steadily increasing percentage of their income to the extent that they earn more. So there is still progressivity, and middle-income earners are receiving relief to the extent that they are also enjoying these personal exemptions.

Mrs. Karen Redman: But you really are looking after the lower end, which I would agree we need to attend to, because the middle class....

If you're going to have revenue neutrality, where are you going to get the money that is no longer being paid by that 13% of the higher tax bracket?

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Ms. Heather Gore-Hickman: A lot of economic analyses say if you tax less you will get more. There's a lot of material out there on the whole issue of productivity and standard of living. This is not the forum to get into all of that, but—

Mrs. Karen Redman: I only raise it because you introduced it in your brief. I think it's very thoughtful, and I thank you for your contribution.

Ms. Heather Gore-Hickman: Thank you.

The Chairman: Thank you, Mrs. Redman.

In your analysis in appendix B, you point to the unfair comparison by the Status of Women and sort of say the fair comparison is to take the $60,000 family income and split it up over two earners, each earning $30,000. I'm wondering if that's realistic. As a family I don't decide, if I'm the principal earner, to all of a sudden forgo $60,000 in favour of two $30,000 incomes.

Ms. Heather Gore-Hickman: Correct.

The Chairman: It's usually, if I'm making $60,000 now, let's see if it would be worth while for my spouse to go out to work. Hopefully the family income would be increased by $80,000, $30,000 or $90,000. Right? So I'm wondering—

Ms. Heather Gore-Hickman: I didn't say they would each earn $30,000. You've pointed out one of the inherent flaws in the Status of Women's analysis. It presumes the earner in the single-income family would pull back on their income if they went into the workforce, which is unreasonable; it wouldn't happen.

I'm looking at two families with the same income looking at one of the spouses going out into the paid workforce, and what the incremental difference would be to the family that perhaps maintained a single income but got a raise. So you're looking at how the incremental income in those two families would be treated differently. The dual-income family would look at a marginal tax rate of about 23.5% and the single-income family would end up bearing a 46% marginal tax rate. I don't know what else I need to say about that. Clearly the incremental impact is more adversarial for the single-income family.

The Chairman: The main reason this subcommittee was struck was because there was the appearance of an inequity between different family combinations—single earner versus dual earners. I'm wondering whether you believe our priority should be to introduce measures to reduce that perceived inequity, or measures that help all people.

Ms. Heather Gore-Hickman: As I've pointed out, the vast majority of dual-income families are impacted by the same elements of discrimination single-income families bear. It's a continuum of discrimination, if you will. Single earners bear the harshest discrimination, but the majority of dual-income families are not accessing the child care expense deduction and they have two incomes not taxed in the same marginal bracket, so they don't experience the optimal tax situation. If they're living next door to a family that has two equal incomes, their tax burden is higher, even though they have two incomes.

So I would like to see us address all families. Targeting children is the most practical means of doing that.

The Chairman: So you're not as preoccupied with the appearance of the inequity that the opposition members were sort of—

Ms. Heather Gore-Hickman: It's impossible to craft tax legislation that would be absolutely neutral to every choice families make. But surely there must be some way of making the disparity between families less and working toward that.

The Chairman: But what I'm trying to get at is should that be the driving force, or if we can somehow get $100 more to all Canadian families, regardless of whether they're single earners or not, should that be the driving force?

Ms. Heather Gore-Hickman: Well, that's a difficult one. Right now 44% of families are single-income families and they get nothing. My heart goes with practically half of the population of families that are being completely shut out of inequities. But there are a lot of dual-income families that are bearing inequities that are almost as harsh. So we should target children, because that's the one common denominator all families have, and work toward mitigating inequities through targeting children. I'm probably not answering to your satisfaction.

The Chairman: No, its—

Ms. Heather Gore-Hickman: When I say 44%, I make the clarification that's a finance department number that recognizes that women earning $6,500 or less are effectively treated as being in single-earner families. Statistics Canada figures show 32% of families as single-income families, so that's where the difference comes in the two numbers. You may not be aware of that, but it was....

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The Chairman: Thank you very much, on behalf of the committee. You put in an awful lot of work, and it's one of the better briefs we received.

Ms. Heather Gore-Hickman: Someday I'll get somebody to give me a job to actually pay me for some of this.

The Chairman: Congratulations. Very well done. Thank you very much.

Ms. Heather Gore-Hickman: Thank you.

The Chairman: We're pleased to now welcome Kids First Parent Association of Canada. I'm now pleased to welcome Cathy Perri, the president of Kids First Parent Association of Canada. We had Cathy Buchanan.

Ms. Cathy Perri (President, Kids First Parent Association of Canada): Yes, her mother-in-law passed away. She's in Ontario.

The Chairman: I apologize. Would you begin then, please. Welcome, on behalf of the committee.

Ms. Cathy Perri: I'd like to begin by stating how disappointed I am to be here today. Kids First has presented to government committees now for 12 years, and our message hasn't changed. While I do appreciate your individual time, the inconveniences and travelling to many different cities in such a limited timeframe, and especially to pass such precious time away from families, I remain skeptical that any changes will be forthcoming.

Although the finance minister has conveyed how important an issue this is to the government, it must be emphasized that this action came only after the junior finance minister put his foot in his mouth, the Secretary of State for the Status of Women attempted to swallow both her legs, and the official opposition exerted the pressure. In fact, this committee's mandate is to study the tax and transfer system as it applies to families with dependent children. Its investigation is to determine if families are treated equitably.

Although tax discrimination against parents at home has been documented and acknowledged by chartered accounts, provincial governments, the federal tax court, and by the federal finance department itself—which incidentally commissioned a working paper on this issue in 1996 at the request of several provincial governments that clearly illustrated the blatant penalties levied against these families—the government still has not progressed to the point where they will admit that a problem actually exists.

Paul Martin has been to Calgary numerous times since he was appointed the finance minister. He always has ample time to attend barbecues in Bragg Creek and meet with college students and petroleum producers, yet he can never seem to find the time to meet with an organization that speaks on behalf of the hundreds of thousands of at-home parents in this country.

It must be pointed out that Alberta's treasurer, the Honourable Stockwell Day, has had the time to meet with us. In fact he went out of his way to convenience us. As a result, the Alberta government has acted by realizing the problem and implementing policies that will substantially reduce the inequities against families with a parent at home. Thank God I live in Alberta.

Tax policy has changed significantly in the past 50 years. We have moved away from a system that held true to the traditional principle of ability to pay and recognized that taxation should reflect not only the level of income but the number of people dependent upon it to one that sees children as just another individual expenditure. As a consequence, the parental caring for children is seen as a waste of an adult's time and talent, and for women a significant barrier to equality and fulfilment.

This devaluation of parental care through tax policy paradoxically occurred at the same time as an ever-expanding body of research is confirming what common sense has always told us: Parents are critical to a child's optimal well-being. What children need to thrive and develop positively is massive quantities of time with their parents. Yet families today are deprived of the vital time they need together to bond and to nurture.

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The logical solution would be to remove the disincentives and barriers to parental care, to give families the opportunity and flexibility to decide what is best to meet their individual family's needs. Family life is not static, but dynamic. The combination of work and family varies significantly throughout the life cycle, depending on each family's circumstances. A family may have a parent at home full-time during the preschool years, with that parent gradually re-entering the paid labour force once children are in school.

Circumstances such as illness or disability, job promotion or loss, separation or divorce, and relocation may mean a change in work and family patterns. Policies must recognize the dynamics of family life and support families, not frustrate them in moving through transitions. Government, however, has remained defiantly resistant to any tax reforms that would end the discrimination against parents at home. It would be too costly, too targeted, and would erect a barrier to women's equality.

Yes, reform does come with a price tag. It is true that change would involve a decrease in revenue, but only if we look at one side of the financial picture. Any investment in what is best for children is one of low risk and high return. Since parental care is ideal for meeting children's developmental needs, a parent in the home is a legitimate social investment in the future of the country.

The government, by its action, obviously believes in this type of investment. The millennium scholarship fund and the newly announced prenatal program are just two recent examples where government has committed significant funds, confidently assuring the Canadian public that these measures are secure financial risks that will produce long-term benefits both financially and socially.

The Standing Committee on Finance, in their 1998 report, focused on the need to increase productivity and to invest in human capital. Children are the generators of future wealth. They are our human capital. Their productivity, and subsequently that of the country, depends upon a considerable investment by their parents in their upbringing. The idea that the economy must be operating below capacity as parents are caring for children neglects this fact.

The report goes on to state that greater productivity requires targeted investments. Yet the finance department has consistently said that any measures to include parents at home, within a tax structure that would give them equality with dual-earner families, would be too targeted. This argument is not consistent with other tax measures. Seniors benefits are targeted to seniors. The millennium scholarships are targeted to students. The child care expense deduction is targeted to dual-income families who use day care. The child tax benefit is targeted to low-income families with children. In fact, tax credits allow the system to be targeted to address particular issues.

Perhaps the most puzzling of all the arguments is that of the government's Status of Women agency, who state that “any measure targeted only at parents who stay home to provide care to children would only further reinforce barriers to employment by reducing the incentive to engage in paid work”. Who would have ever thought that treating families fairly, recognizing parents at home as contributing members of society, and valuing the care of children would be a barrier to equality? Who would have ever thought that discrimination against a significant portion of women would be defended, justified, and promoted by a government department committed to achieving women's equality? Equality for all women has now become a barrier to the new feminist goal of superiority for the few, and women at home need not apply.

So what can be done? Numerous initiatives have been recommended by Kids First and other organizations over the years, but they've always been dismissed without any analysis as to their feasibility. Income-splitting and joint buying are often the most commonly advanced solutions. The Alberta initiative of the single rate tax with generous and equal spousal and personal deductions is another. The child care expense deduction has been justified by government as necessary to facilitate employment for families with children by recognizing that they have specific expenses because both parents work outside the home.

They ignore, however, the fact that single-income families also have expenses particular to their situation. Ironically, the tax system acknowledges the cost of running a day home as legitimate, thereby allowing certain deductions in recognition that care of children in the home involves costs. Allowable deductions include percentage of utilities, mortgage interest, insurance, maintenance fees, property taxes. The costs recognized by government in the caring of children in the home only apply, however, to situations where the children cared for are not those of the caregiver.

Kids First recommends that the child care expense deduction be either eliminated or made available to all families. It would appear, though, that this is not likely to happen. After all, it is the wealthy who primarily benefit from this measure, and it is the wealthy who contribute nicely to political campaigns. Add to this the fact that only a minority of eligible families claim this deduction and one quickly realizes that it is not worth the government's effort to make changes.

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If the child care expense deduction appears to be here to stay, we would suggest it be tightened up. Allowable costs should be limited to just those of actual child care and should not include hockey camps, play schools, lunchroom fees, etc. In addition, the age limit for eligibility being 16 is ludicrous, since no child care centre, to our knowledge, accepts 16-year-olds and since children can legally babysit at the age of 12. It makes no sense, other than a nice little scheme to subsidize the enrichment activities of the wealthy.

The most prevalent misunderstanding centred on this issue is that reforms will give preferential treatment to those families with an at-home parent while penalizing those who choose differently. This is false. Any changes must treat families fairly and equitably. Bribing families to have a parent at home is not the goal of reform. Giving families choice is.

Kids First's message to government is simple. First, admit there's a problem. Second, fix the problem. We don't necessarily care how; we just want it done. Enough studies, enough reports, enough rhetoric and empty promises. Since the government has largely created the problem, it can create the solution. It has the money, the experts, the time, and the manpower.

Thank you.

The Chairman: Thanks for that clear, concise message.

Mr. Forseth, please, for six minutes.

Mr. Paul Forseth: Thank you very much.

I hear your call about fixing it, and the existence of this committee is in part a recognition that maybe indeed a problem exists. It is said that change begins with the recognition that a problem exists.

I just have one question for you, and I'll leave it to others to pursue further. In view of specifically the child care expense deduction, have you thought of a way to value the expense of the other parent who does it at home? How do you actually financially acknowledge a stay-at-home child care choice as the flip side of the child care expense deduction for purchased day care? How would you technically do that?

Ms. Cathy Perri: Well, I'm not a tax expert, so I really don't know how you would technically do that.

Mr. Paul Forseth: Can I just stop you? That is the very first statement that every person I've asked that question says: “I'm not a tax expert.” But we have to wrap our minds around this to offer at least some possible scenarios.

Ms. Cathy Perri: My response would be that the government has access to the experts and has access to people who spend their lives looking at the tax system and various changes; that's their career.

Mr. Paul Forseth: Okay, but I'm saying in some respects, the public is in charge. We have a vision, and I'm asking what your vision in the community would be, what you would consider possible for the government to do. Would you see it as within the realm of possibility that some kind of cheque would be mailed from the government to the caregiver at home? That's one solution.

Ms. Cathy Perri: Another solution could be that you allow the deduction to go to all families, or turn it into a credit made available to all families with children, or something to that effect.

I concur with Heather; I think it would be very difficult to mail it to the parent sometimes and target their activity. If you extended it to everybody—

Mr. Paul Forseth: Well, how do you do it? That's my question. If you purchase something, you have a receipt, and there's a market that operates concerning value, but if you're doing that yourself in your home, how do you impute a value to that? We know that among those who go out and purchase the service, there's a great variety of how much is purchased. Some will purchase way up to the allowable limit; some of them only purchase half or a lower portion.

I'm trying to figure out the flip side of that coin, the child care expense deduction. How can we value the child care being done in the household? Do you have some kind of technical scheme to suggest to us?

Ms. Cathy Perri: No, not offhand I don't. Right now we have the $7,000 deduction for children up to the age of seven and $4,000 up to the age of 16. If you extended that to everybody—

Mr. Paul Forseth: How do you extend that to everybody?

Ms. Cathy Perri: They just deduct it off their—

The Chairman: Well, they need the teeth, and that's what Mr. Forseth is saying.

Ms. Cathy Perri: Maybe we could make it.... I don't know. The government has the money and the experts and everything.

You were talking about receipts. What's interesting is that for some forms of child care, stay-at-home parents do have receipts. We have receipts for lunchroom fees; we have receipts for hockey camp; we have receipts for play school. We could access those receipts too if we wanted to. We don't get them, because they don't serve us any purpose.

Mr. Paul Forseth: Okay, so that might be a suggestion.

The Chairman: If a parent is working, they're allowed to claim those.

Ms. Cathy Perri: No. If my child is in playschool and I'm a stay-at-home mom, my husband can't claim playschool fees.

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The Chairman: I know I send my son to a day care camp during the summer, and I'm allowed to claim that as an expense. And my wife stays at home.

Ms. Cathy Perri: I don't know how that works.

The Chairman: Maybe Mr. Szabo will be able to touch on that.

Ms. Cathy Perri: Maybe Ms. Gore-Hickman could answer that.

Ms. Heather Gore-Hickman: Yes, if I may.

The Chairman: Could you use the microphone for translation purposes, please, and say your name.

Ms. Heather Gore-Hickman: I'm Heather Gore-Hickman, and I don't want to take Cathy's time.

The deduction is meant to be for reimbursement of expenses for child care while the parent is earning an income, the second income. So I hope you're not audited.

I don't think it's legitimate unless there's a second income. The idea of the hockey camps, the piano lessons, and the lunch fees is that they are comparable to the commercial day care. Technically, if mom's at home and she's on her day off, the cost of swimming lessons and what not are not deductible.

The Chairman: I don't know. They send me a receipt and my auditors do their thing.

Ms. Heather Gore-Hickman: Well, I get receipts too, but I can't claim them if they aren't during a period of time when I'm actually earning an income.

The Chairman: Thank you.

Did you want to add anything, Cathy?

Ms. Cathy Perri: No.

[Translation]

The Chairman: Mr. Cardin.

Mr. Serge Cardin: Good morning and thank you for coming, even though you're not happy with having to make the same demands repeatedly.

As our consultations progress and the more I think about this issue, the more I realize that the problem here is not one of equity between two sources of income. The issue here is children and the choice parents make either to stay at home and care for their children themselves or to enter the workforce and put their children in daycare.

Judging from what the witnesses have said, to help those who stay at home to care for their children, the government should bring in a credit which reflects the true costs of raising a child. Initially, the credit could be universal, but clawed back based on income. In your opinion, would this initiative address the needs of parents who stay home to raise their children?

[English]

Ms. Cathy Perri: Thank you.

I think it could possibly meet the need of a family with a parent at home. I think I would probably disagree in a way when you were saying the issue's not about inequality. I think in a lot of ways it is. I know with the thousands of people we hear from, it seems to be their biggest complaint about everything—the way the tax system treats them.

I think a lot of families who have a parent at home accept the fact that when we choose to be at home, we're giving up a second income. We accept that our standard of living will change and go downward, and we're willing to accept that. That is a choice we've made. We understand the consequence of that choice. We just don't expect to have the extra penalties put on top of it when it becomes tax time.

[Translation]

Mr. Serge Cardin: I want to get back to the subject of the inequity between one and two incomes. As I understand it, an individual is taxed according to his or her income level. If the combined incomes of two persons more or less total that earned by a single person, theoretically, the two income-earners should, when all is said and done, have a higher net income.

Two persons working full time and having a combined income of $60,000 should theoretically have more money in their pockets that one person earning the same income, given our escalating tax system. If the latter acquires a partner, either through marriage or some other way, this doesn't change the fact that there is still only one income.

In my opinion, exemptions are the main problem. Personal exemptions have not been adjusted for several years and any change would ultimately affect the tax bill. The spousal exemption for the parent who stays home could be adjusted, along with the child exemption, thereby providing some additional relief to parents who want to stay home to care for their children.

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[English]

Ms. Cathy Perri: I definitely agree with you when you claim that the deduction exemption is low. They're also unequal, so that you're worth more for working outside the home. The personal exemption is higher than the spousal deduction, which right there sends the message that you're more valuable for what you do in the paid economy than what you do when you're at home. So I think that would be something we would like to see. We would like to see the deduction exemption raised and made equal.

[Translation]

The Chairman: Thank you, Mr. Cardin.

[English]

Madame Dykxhoorn.

Ms. Hermina Dykxhoorn: No.

The Chairman: Mr. Herron, please.

Mr. John Herron: One of the comments you made was that the child care expense deduction is extremely regressive, in that it's worth more to individuals who actually earn more income. If we were to talk about the mechanism to be able to deliver the fairness, one suggestion that was made today and even yesterday is to go back to a similar formula to what we had in terms of a family allowance where it was targeted to the primary caregiver, so it was equitable in that regard, and was tied to families with children, and by perhaps lowering the age because of the critical years between one and three and the pre-school aspect of it.... Is this something you think you and your neighbours and your friends would have an appetite for?

Ms. Cathy Perri: I think it might be a possible solution, something to be looked at seriously. I think too with the deduction what we've said before is that really it's not the major source of inequality within the tax system; it's basically the fact that our system is based on the individual as the unit of taxation, so there you get the discrepancy. Even if you fixed the deduction and gave it to everybody, at the end of the tax year there would still be that inequality there. But I definitely think it's something worth looking at, because it would recognize that children cost money, whether you're at home with them or whether you're working outside the home with them.

Mr. John Herron: One of the arguments against income-splitting is that they think the income-splitting is actually regressive almost in the same way, that it would benefit those individuals who make higher incomes. What would you say about the argument saying that not to have income-splitting would be regressive, in that there are numerous professionals, whether they be dentists or doctors, whose spouses quite often are on the payroll in that regard, so only the elite of the elite have access to income-splitting, while middle-income Canadians don't have access to income-splitting? So not to at least address the income-splitting or the family income perspective is almost even more punitive, almost more regressive, because of the higher end. Would you think that comment is not that far off the wall?

Ms. Cathy Perri: From what I've read, it's probably true in some respects, but like I said, I come from a nursing background; I'm a nurse, not a tax expert or an accountant. I've read those arguments, but I think, as I said in our message for Kids First, we know there's a problem and we would just like to see it fixed. It doesn't really matter to us how it's done; we would just like to see it done. What Alberta is doing is something I can understand. I know there are problems with that as well, but at least they're attempting to do something. Perhaps we could look to that solution or just see what happens in the province of Alberta with the results of that.

Mr. John Herron: Given that only one-third of parents claim the child care expense deduction and that the average claim is about $2,600, which translates into about $700 more into each family's pockets, would you say that any measure targeted only at parents who stay at home to provide care to children would further reinforce barriers to employment by reducing the incentive to engage in paid work? Do you think professional women, or people who used to participate in the workforce, could be almost bought off for $700, that they're not capable of making up their own mind in that regard? I think that's almost a reverse sexist comment.

Ms. Cathy Perri: You mean the comment about the barrier. That wasn't my comment; that was the comment of the Status of Women.

Mr. John Herron: Exactly. I was just trying to see if you could expand on that particular quote.

Ms. Cathy Perri: I think what we have heard from Status of Women is anything that would give families the choice, anything that would stop penalties for families with a parent at home, would provide a barrier and therefore women would be coming home in massive droves. I think from our meetings with Dr. Hedy Fry and with other meetings within the Status of Women it's clear they really don't want women to have the choice to be at home and they're going to do everything within their power to make sure the system stays the way it is, because the way it is penalizes families with a parent at home. So I think to them it is a barrier; they don't want women to have that choice.

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The Chairman: Thank you very much.

Mr. Szabo, please.

Mr. Paul Szabo: Cathy, thank you very much for appearing on behalf of Kids First here. I think most members are very familiar with Kids First, because I know your organization's worked very hard to bring these matters to our attention at every opportunity. So thank you. I think your message has been heard.

Mr. Forseth was trying to establish, if we were to do something, how much do we have to do so that we don't insult stay-at-home moms. I think that's what it really comes to. There was an article in the Globe and Mail yesterday that costed out things, and I think we've given some estimated costs. A $1,000 refundable tax credit like the child tax benefit to all children would cost $7 billion. It just isn't going to happen. We can't say we're going to spend $7 billion. The caregiver benefit for caring for an aged parent is worth about $400 in one's pocket.

The child care expense deduction is more problematic. Nobody can come up with a number because you have to make assumptions, and the assumptions generate a range of answers. Although a couple with a preschool child can deduct up to $7,000, it depends on what the lower-income-earner spouse's income level is. At the highest rate, the deduction would be worth $3,500. At the lowest rate it would be worth $1,750. If they don't spend the full $7,000 it could be something less.

The history of what happened in 1996 shows us that fewer than half of couples that can claim it do claim it. So obviously there are some more problems to deal with. It could be in part what some refer to as “unreceipted child care”, and they believe it's somehow okay. For others that's tax fraud, because it's not claiming income because we agree not to claim the deduction.

So maybe the question still to you is that there are many ways whereby we could deliver benefits to a stay-at-home caregiver. Not one of them in the existing system of tax or non-tax programs is very efficient. Maybe we should just identify some of the trouble we have massaging or re-engineering existing programs so that others can look at it and maybe through tax reform or some other way clean up this mess, and simply address the question baldly that we think it's time there is a recognition or an acknowledgement of a contribution made by a direct parental caregiver and to recognize that we state it and financially we provide a benefit that would be as inclusive as possible for lone-parent situations, farm moms, students who have no income but have a child. So it would be something equivalent to what the child tax benefit is: it's non-taxable, in your pocket on a monthly basis.

The question is, what would that amount be, or what should it be as a starting point, acknowledging that it could only be a starting point?

Ms. Cathy Perri: That's a very difficult question. I think I'm priceless. That would be a really hard one, and it would take a lot of thought as to what your starting point would be.

Mr. Paul Szabo: The first step is the acknowledgement or recognition.

Ms. Cathy Perri: Yes, and I'd like to see that. I'd like to see them admit there is a problem and ask what can we do to fix it. I think too it's the cost. And as I alluded to my report, I think you also have to look at how much can be saved when you're investing money into allowing families to have the choice and to have a parent at home.

I think we have to look back to the caregiver's tax credit, which I know you worked so very hard on. I think what was disappointing to a lot of us is that it deliberately left out families with a parent at home. And we know the legislation that preceded it, your motion that preceded it, actually included families looking after children. When it was implemented that was the one group, the only one group, that was left out, which sent a very strong message to stay-at-home parents. That was very unfortunate.

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Mr. Paul Szabo: Well, you'll be pleased to know that we've had many witnesses who have made the argument very well that there are a number of economic sacrifices that are made, opportunities that are forgone, and contributions that a stay-at-home parent makes over and above the child care thing that are of value to all Canadians. And I sense that we've always recognized that fact, but when you get into situations where you're trying to balance books and then finding competing interests like health care, education, paying down debt, and reducing taxes for everybody, there's competing interest. This is probably the best time I could think of, coming into a new millennium, to basically recognize the value of children. I think for most of us it's a children's issue.

Ms. Cathy Perri: Very much so.

Mr. Paul Szabo: It's a children's issue, and we're not going to.... I hope you understand that we don't want to be judgmental about people's choices.

Ms. Cathy Perri: Oh, neither do we. Kids First has always said that we want families to be treated fairly and equitably—no preferential treatment. We're very well aware that the wall between the stay-at-home mom and the working-outside-the-home mom is very blurry, and today's stay-at-home mom could be tomorrow's working-outside-the-home mom, depending on what happens in the family's circumstances. I think we would like to see acknowledgement too that some families need to have a parent at home, just as much as there are some families who need to have a parent in the labour force. That can come from a whole host of situations within the family, where a parent does really need to be there.

We also know that within social services. There are times when we have social services advertising for foster families that specifically have a parent at home, because a child needs optimal nurturing due to various difficulties. That's wonderful, but then you're penalized by the tax system if you choose to do so.

We also see some wonderful things happening in the government in terms of health, where they're promoting the breast-feeding of children up until two years of age, and looking at the justice system, at crime prevention and how important parents are. The Department of Human Resources Development did a national longitudinal survey talking about parents being a protective factor for other risk factors in a child's life.

So we see that recognition in other areas. It's just when it comes down to the tax system that you're penalized if you invest too much time. I think there has to be some sort of communication among all the departments, so if Health Canada is going to say to breast-feed your child till two years of age, if you're going to say that parents matter and that they need to be with their children more, we have to look at ways not to penalize them for doing that.

Mr. Paul Szabo: Thank you.

Ms. Cathy Perri: Thanks.

The Chairman: Ms. Redman, please.

Mrs. Karen Redman: Thank you, Ms. Perri. I really appreciate the intervention you've just made, because I have to tell you I'm having a hard time not reacting to some of the value-laden statements that are in your written presentation.

I agree, I don't believe the tax system should be used for social engineering. What it should do is allow parents maximum choice. But when I read the last paragraph under solutions and recommendations, it's pretty strongly worded. You say the eligibility age limit of 16 is ludicrous, and you go on to say that actual child care should not include hockey camps, play schools, lunchroom fees, etc. I would contend that some of those.... I mean, the age 16 may be a legitimate thing that should be looked at. But we are allowing families who are working the flexibility of allowing those kinds of experiences for their children. So I'm glad to hear in your verbal intervention that you seem a little more inclusive and not quite as prescriptive in the kinds of solutions you see.

Ms. Cathy Perri: Well, I think, Karen, you have to understand where we're coming from. The last time we presented to the finance committee here we were told that we were elite white women, that stay-at-home moms took the easy way out, and that any concerns we had about the cultural devaluation of parenting were due to our own personal low self-esteem. Whenever we go and talk to government, we get attacked like that. So if we come off as being cynical or a little bit prescriptive, I think sometimes it's warranted, because we constantly have to defend what we're doing and what we're saying.

In terms of activities for children, families with a parent at home also put their children into playschool and also have lunchroom fees to pay for their child, and we're not allowed access to that. That is a tremendous bone of contention with stay-at-home parents, when you go to pick up your child from playschool and the working-outside-the-home mom is able to take her receipts and deduct them, regardless of her or her family's income. When you're struggling to make it on one income and struggling to put your child in playschool for the enrichment activity, to find out that the government doesn't recognize that it's costing you anything and therefore you can't deduct that sends a very angering message. That is what we hear on a regular basis from people. You can't help but feel angry and cheated, and feel that you're really being looked down upon by society and by the government.

Mrs. Karen Redman: If I can just continue, those comments were made by individual members and don't speak for the whole finance committee. I'm a member of the Standing Committee on Finance, and was actually on the eastern leg. So I hope you don't attribute specific....

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We all come to the table with our own bag of experiences and our own prejudices. I was a stay-at-home mom with four children for several years. What I feel we need to do is afford the opportunity for choice. That's the biggest gift we can give Canadian families.

Ms. Cathy Perri: I would agree with you. Kids First has always been about that.

We tend to be portrayed as a group that feels women should all be at home, and if you're not, then you're going to raise horrible, rotten children. That's definitely not what the organization is about. It's about allowing families to have the choice to be there, and for the ones who do choose to be there, it's about respecting them for that and seeing them as valuable and contributing members of society.

The reason we have always talked about the choice aspect is we don't know what's in the future for our families. It could be a divorce or a death. Who knows what's going to happen? The situation could be reversed and we could be the working-outside-the-home moms. Therefore we don't want to see that choice penalized either.

Mrs. Karen Redman: I went as part of a women's trade mission to Washington, D.C., and those female entrepreneurs, who were the targeted group we were with, said they wanted to be able to have a legitimate business expense of having a nanny in the home, because they have to travel, and some of them are lone parents. So when we look at solutions, it has to be the broad spectrum.

Ms. Cathy Perri: Oh, yes. I don't think you're going to find a one-size-fits-all type of policy. There's going to have to be some flexibility there.

Mrs. Karen Redman: Thank you for coming. Look at this as another opportunity to bring your message forward.

Ms. Cathy Perri: Thanks.

The Chairman: Thank you, Ms. Redman.

I just have one small question on the monetary value we would place on the care given at home by the stay-at-home parent. Do you agree that if we're going to try to compensate that value somehow, a certain portion of that would also have to be given to the working parent? Because certainly when they come home, they still have to give a certain amount of care to their children also. It doesn't stop because you have day care from nine to five or from seven to five, for example.

So if we're trying to assess the value, in my opinion, the only people penalized are the ones who stay at home, and it's only that portion of the additional value they provide that they're not getting compensated for, if you're following me. Of the care required overall for children, do you have any idea what the differential value would be of the time spent by a person fully at home versus another one who's working?

Ms. Cathy Perri: Do you mean the value of them both? Is that what you're—

The Chairman: Obviously there are certain needs that have to be addressed, right?

Ms. Cathy Perri: Yes.

The Chairman: One person is providing them on a full-time basis, but it doesn't mean those needs are less than for another person who's providing them through commercial day care, for example. They still have to drive the children to hockey arenas, piano lessons, etc. There are still responsibilities for the child, even though the person is working full-time.

What I'm getting at is you can't just compensate those who are staying at home.

Ms. Cathy Perri: What we'd like to say is, right now, the way the tax system is, we are the ones being penalized, so why can't we just be included in the loop? Why can't there be some sort of tax reform that will include us in this?

The family that has both parents working in the labour force and their child in day care gets the maximum tax benefit and tax breaks from the way the system is set up. It's the families with a parent at home that aren't.

So why can't we be included? Why do we have to be specifically penalized for the choice we've made? The ones who are working outside the home are recognized as having child care costs, are recognized as having specific costs for them to earn income.

The Chairman: They're always trying to evaluate it.

Ms. Cathy Perri: Exactly, yes.

The Chairman: Thank you again.

There are no other questions?

I'd like to thank you on behalf of the committee for a very thoughtful presentation. We hope we won't be another one of those committees that will let you down. We'll try to make some recommendations that—

Ms. Cathy Perri: I want to retire soon, so I don't want to have to come back.

The Chairman: Thank you very much.

The meeting is adjourned.